Discussion Paper No. 166
November 8, 2021
Socio-Economic Status and Inequalities in Children's IQ and Economic Preferences
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This paper explores inequalities in IQ and economic preferences between children from high and low socio-economic status (SES) families. We document that children from high SES families are more intelligent, patient and altruistic, as well as less risk-seeking. To understand the underlying causes and mechanisms, we propose a framework of how parental investments as well as maternal IQ and economic preferences influence a child's IQ and preferences. Within this framework, we allow SES to influence both the level of parental time and parenting style investments, as well as the productivity of the investment process. Our results indicate that disparities in the level of parental investments hold substantial importance for SES gaps in economic preferences and, to a lesser extent, IQ. In light of the importance of IQ and preferences for behaviors and outcomes, our findings offer an explanation for social immobility
Keywords:
socio-economic status; time preferences; risk preferences; altruism; experiments with children; origins of preferences; human capital;
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Discussion Paper No. 158
Decentralizing Centralized Matching Markets: Implications from Early Offers in University Admissions
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The matching literature commonly rules out that market design itself shapes agent preferences. Underlying this premise is the assumption that agents know their own preferences at the outset and that preferences do not change throughout the matching process. Under this assumption, a centralized matching market can often outperform a decentralized one. Using a quasi-experiment in Germany's university admissions, we provide evidence against this assumption. We study a centralized clearinghouse that implements the early stages of the university-proposing Gale-Shapley deferred-acceptance mechanism in real time, resembling a decentralized market with continuous offers, rejections, and acceptances. With data on the exact timing of every decision, we show that early offers are more likely to be accepted than (potential) later offers, despite early offers not being made by more desirable universities. Furthermore, early offers are only accepted after some time rather than immediately. These results and direct survey evidence are consistent with a model of information acquisition: it is costly for students to learn about universities and accepting a university that turns out to be inferior causes regret. We discuss and rule out some alternative hypotheses. Our findings motivate a hybrid mechanism that balances centralization and decentralization. By allowing sequential learning, it improves welfare, especially in markets with substantial learning costs.
Keywords:
centralized matching market; gale-shapley deferred acceptance mechanism; university admissions; early offers; information acquisition;
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Discussion Paper No. 153
Experiments on Matching Markets: A Survey
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The paper surveys the experimental literature on matching markets. It covers house allocation, school choice, and two-sided matching markets such as college admissions. The main focus of the survey is on truth-telling and strategic manipulations by the agents, on the stability and efficiency of the matching outcome, as well as on the distribution of utility.
Keywords:
C92; D47; D83;
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Discussion Paper No. 151
Obviousness Around the Clock
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Li (2017) supports his theoretical notion of obviousness of a dominant strategy with experimental evidence that bidding is closer to dominance in the dynamic ascending-clock than the static second-price auction (private values). We replicate his experimental study and add three intermediate auction formats to decompose this behavioral improvement into cumulative effects of (1) seeing an ascending-price clock (after bid submission), (2) bidding dynamically on the clock and (3) getting drop-out information. Li's theory predicts dominance to become obvious through (2) dynamic bidding. We find no significant behavioral effect of (2). However, both (1) and (3) are highly significant.
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Discussion Paper No. 150
Effects of Timing and Reference Frame of Feedback
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Information about past performance has been found to sometimes improve and sometimes worsen subsequent performance. Two factors may help to explain this puzzle: which aspect of one's past performance the information refers to and when it is revealed. In a field experiment in secondary schools, students received information about their absolute rank in the last math exam (level feedback), their change in ranks between the second-last and the last math exam (change feedback), or no feedback. Feedback was given either 1-3 days (early) or immediately (late) before the final math exam of the semester. Both level feedback and change feedback significantly improve students' grades in the final exam when given early and tend to worsen them when given late. The largest effects are found for negative change feedback and are concentrated on male students, who adjust their ability beliefs downwards in response to feedback.
Keywords:
timing of feedback; type of feedback; beliefs; education; field experiment;
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Discussion Paper No. 149
Do Party Positions Affect the Public's Policy Preferences?
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The standard assumption of exogenous policy preferences implies that parties set their positions according to their voters' preferences. We investigate the reverse effect: Are the electorates' policy preferences responsive to party positions? In a representative German survey, we inform randomized treatment groups about the positions of political parties on two family policies, child care subsidy and universal student aid. In both experiments, results show that the treatment aligns the preferences of specific partisan groups with their preferred party's position on the policy under consideration, implying endogeneity of policy preferences. The information treatment also affects non-partisan swing voters.
Keywords:
political parties; partisanship; survey experiment; information; endogenous preferences; voters; family policy;
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Discussion Paper No. 148
Peer Effects of Ambition
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Ambition as the desire for personal achievement is an important driver of behavior. Using laboratory experiments, we study the role of social influence on ambition in two distinct domains of achievement, namely performance goals and task complexity. In the first case, participants set themselves a performance goal for a task they have to work on. The goal is associated with a proportional bonus that is added to a piece rate if the goal is reached. In the second case, they choose the complexity of the task, which is positively associated with the piece rate compensation and effort. In both cases we test whether observing peer choices influences own choices. We find strong evidence of peer effects on performance goals. In contrast, we find no support for peer effects on the choice of task complexity.
Keywords:
peer effects; ambition; goal setting; task difficulty; laboratory experiment;
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Discussion Paper No. 146
Incentives, Search Engines, and the Elicitation of Subjective Beliefs: Evidence from Representative Online Survey Experiments
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A large literature studies subjective beliefs about economic facts using unincentivized survey questions. We devise randomized experiments in a representative online survey to investigate whether incentivizing belief accuracy affects stated beliefs about average earnings by professional degree and average public school spending. Incentive provision does not impact earnings beliefs, but improves school-spending beliefs. Response patterns suggest that the latter effect likely reflects increased online-search activity. Consistently, an experiment that just encourages search-engine usage produces very similar results. Another experiment provides no evidence of experimenter-demand effects. Overall, results suggest that incentive provision does not reduce bias in our survey-based belief measures.
Keywords:
beliefs; incentives; online search; survey experiment;
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Discussion Paper No. 145
The Political Economy of Higher Education Finance: How Information and Design Affect Public Preferences for Tuition
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Public preferences for charging tuition are important for determining higher education finance. To test whether public support for tuition depends on information and design, we devise several survey experiments in representative samples of the German electorate (N > 19,500). The electorate is divided, with a slight plurality opposing tuition. Providing information on the university earnings premium raises support for tuition by 7 percentage points, turning the plurality in favor. The opposition-reducing effect persists two weeks after treatment. Information on fiscal costs and unequal access does not affect public preferences. Designing tuition as deferred income-contingent payments raises support by 16 percentage points, creating a strong majority favoring tuition. The same effect emerges when framed as loan payments. Support decreases with higher tuition levels and increases when targeted at non-EU students.
Keywords:
tuition; higher education; political economy; survey experiments; information; earnings premium; income-contingent loans; voting;
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Discussion Paper No. 128
Obstacles to Efficient Allocations of Public Education Spending
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Economic research suggests that investments in early education are generally more successful than investments at later ages. This paper presents a representative survey experiment on education spending in Germany, which exhibits low relative public spending on early education. Results are consistent with a model of misconceptions: informing randomly selected respondents about benefits of early education spending shifts majority support for public spending increases from later education levels to spending on early and primary education. Effects of information provision persist over a two-week period in a follow-up survey. By contrast, results do not suggest self-interested groups inefficiently allocate public education spending.
Keywords:
misconceptions; public spending; education spending; information; survey experiment;
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