A07
Obstacles to Convergence in Regional Development: Behavioral Explanations
Discussion Papers

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Discussion Paper No. 342
October 11, 2022

The Effect of Preferential Admissions on the College Participation of Disadvantaged Students: The Role of Pre-College Choices

Authors:
Tincani, Michela M. (UCL and CEPR)
Kosse, Fabian (University of Würzburg and briq)
Miglino, Enrico (UCL)
Abstract:
Exploiting the randomized expansion of preferential college admissions in Chile, we show they increased admission and enrollment of disadvantaged students by 32%. But the intended beneficiaries were nearly three times as many, and of higher average ability, than those induced to be admitted. The evidence points to students making pre-college choices that caused this divergence. Using linked survey-administrative data, we present evidence consistent with students being averse to preferential enrollment, misperceiving their abilities, and having social preferences towards their friends (although social preferences did not mediate the admission impacts). Simulations from an estimated structural model suggest that aversion to the preferential channel more than halved the enrollment impacts, by inducing some to forgo preferential admission eligibility, and that students' misperceptions worsened the ability-composition of college entrants, by distorting pre-college investments into admission qualifications. The results demonstrate the importance of understanding high school students' preferences and beliefs when designing preferential admissions.
Keywords:
preferential college admissions; experimental policy evaluation; subjective beliefs; dynamic choice model
JEL-Classification:
I2; D8
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Discussion Paper No. 339
September 29, 2022

The Empirics of Economic Growth Over Time and Across Nations: A Unified Growth Perspective

Authors:
Cervellati, Matteo (University of Bologna)
Meyerheim, Gerrit (LMU Munich)
Sunde, Uwe (LMU Munich)
Abstract:
This research develops an expanded unified growth theory that incorporates the endogenous accumulation of physical capital, population, human capital, and technology. The model incorporates a complementarity between physical capital and human capital and can be extended to a multi-country setting with international technology diffusion. The analytical characterization of the mechanisms behind the observed patterns of long-run growth and comparative development delivers a consistent explanation for a large set of seemingly unrelated empirical facts. A quantitative multi-country version of the model matches various empirical regularities of long-run growth dynamics and comparative development patterns that have previously been studied in isolation. The findings also shed new light on the role of the demographic transition for convergence patterns, the specification of cross-country growth regressions, technology spillovers, and the secular stagnation debate.
Keywords:
unified growth; long-run development; demographic transition; secular stagnation
JEL-Classification:
O47; O11; O15; E24
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Discussion Paper No. 338
September 13, 2022

Does Demography Determine Democratic Attitudes?

Authors:
Kotschy, Rainer (Harvard University)
Sunde, Uwe (LMU Munich)
Abstract:
This paper presents new evidence on how demography affects democratic attitudes in Western democracies. Using individual survey responses, the empirical analysis disentangles age from cohort patterns and other contemporaneous economic and political influences that shape democratic attitudes. The results reveal that support for democracy increases with age and is lower for more recent birth cohorts. These patterns are more pronounced in Western democracies than in the former Eastern bloc and in other countries around the world. Additional findings document that demography's effect partly captures heterogeneity in experiences with democracy, and that socioeconomic factors impact democratic attitudes.
Keywords:
support for democracy; age-periods-cohort models; population aging; demographic composition; stability of democracy; modernization hypothesis
JEL-Classification:
D72; O17; O43; P48
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Discussion Paper No. 317
February 4, 2022

Speed, Quality, and the Optimal Timing of Complex Decisions: Field Evidence

Authors:
Strittmatter, Anthony (CREST-ENSAE)
Sunde, Uwe (LMU Munich)
Zegners, Dainis (Rotterdam School of Management)
Abstract:

This paper presents an empirical investigation of the relation between decision speed and decision quality for a real-world setting of cognitively-demanding decisions in which the timing of decisions is endogenous: professional chess. Move-by-move data provide exceptionally detailed and precise information about decision times and decision quality, based on a comparison of actual decisions to a computational benchmark of best moves constructed using the artificial intelligence of a chess engine. The results reveal that faster decisions are associated with better performance. The findings are consistent with the predictions of procedural decision models like drift-diffusion-models in which decision makers sequentially acquire information about decision alternatives with uncertain valuations.

Keywords:
response times; speed-performance profile; drift-diffusion model; uncertain evaluations
JEL-Classification:
D01; D09; C07; C08
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Discussion Paper No. 296
November 15, 2021

Malleability of Preferences for Honesty

Authors:
Abeler, Johannes (University of Oxford, IZA and CESifo)
Falk, Armin (briq and University of Bonn)
Kosse, Fabian (LMU Munich and briq)
Abstract:
Reporting private information is a key part of economic decision making. A recent literature has found that many people have a preference for honest reporting, contrary to usual economic assumptions. In this paper, we investigate whether preferences for honesty are malleable and what determines them. We experimentally measure preferences for honesty in a sample of children. As our main result, we provide causal evidence on the effect of the social environment by randomly enrolling children in a year-long mentoring programme. We find that, about four years after the end of the programme, mentored children are significantly more honest.
Keywords:
honesty; lying; truth-telling; formation of preferences; experiments with children
JEL-Classification:
C90; D90; D64; D82; H26; J13
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Discussion Paper No. 295
November 15, 2021

The Origins of Gender Differences in Competitiveness and Earnings Expectations: Causal Evidence from a Mentoring Intervention

Authors:
Boneva, Teodora (University of Bonn)
Buser, Thomas (University of Amsterdam and Tinbergen Institute)
Falk, Armin (briq and University of Bonn)
Kosse, Fabian (LMU Munich and briq)
Abstract:
We present evidence on the role of the social environment for the development of gender differences in competitiveness and earnings expectations. First, we document that the gender gap in competitiveness and earnings expectations is more pronounced among adolescents with low socioeconomic status (SES). We further document that there is a positive association between the competitiveness of mothers and their daughters, but not between the competitiveness of mothers and their sons. Second, we show that a randomized mentoring intervention that exposes low-SES children to predominantly female role models causally affects girls' willingness to compete and narrows both the gender gap in competitiveness as well as the gender gap in earnings expectations. Together, the results highlight the importance of the social environment in shaping willingness to compete and earnings expectations at a young age.
Keywords:
competitiveness; gender; socioeconomic status; inequality; earnings expectations
JEL-Classification:
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Discussion Paper No. 293
November 11, 2021

Malaria and Chinese Economic Activities in Africa

Authors:
Cervellati, Matteo (University of Bologna, CEPR and IZA) 
Esposito, Elena (HEC and University of Lausanne)
Sunde, Uwe (LMU Munich, CEPR and IZA)
Yuan, Song (University of Warwick)
Abstract:
We present novel evidence for the influence of malaria exposure on the geographic loca- tion of Chinese economic activities in Africa. The hypothesis is based on the observation that many Chinese aid projects and infrastructure contractors rely on Chinese personnel. High malaria exposure might constitute an important impediment to their employment and productivity. Combining data on Chinese aid and construction projects with geo-localized information about the presence of individuals from internet posts reveals a lower density of Chinese activities and of Chinese workers in areas with a high malaria exposure. This e↵ect is mitigated partly through heterogeneity across sectors and immunity of the local population, through the selection of Chinese workers from regions in China with historically high malaria risk, and through the availability of malaria treatment.
Keywords:
infrastructure projects; malaria; disease prevalence; immunity; weibo
JEL-Classification:
F2; F6; J2; J6
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Discussion Paper No. 292
November 11, 2021

Patience and Comparative Development

Authors:
Sunde, Uwe (LMU Munich) 
Dohmen, Thomas (University of Bonn)
Enke, Benjamin (Harvard University)
Falk, Armin (briq and University of Bonn)
Huffmann, David (University of Pittsburgh)
Meyerheim, Gerrit (LMU Munich)
Abstract:
This paper studies the relationship between patience and comparative development through a combination of reduced-form analyses and model estimations. Based on a globally representative dataset on time preference in 76 countries, we document two sets of stylized facts. First, patience is strongly correlated with per capita income and the accumulation of physical capital, human capital and productivity. These correlations hold across countries, subnational regions, and individuals. Second, the magnitude of the patience elasticity strongly increases in the level of aggregation. To provide an interpretive lens for these patterns, we analyze an OLG model in which savings and education decisions are endogenous to patience, aggregate production is characterized by capital-skill complementarities, and productivity implicitly depends on patience through a human capital externality. In our model estimations, general equilibrium effects alone account for a non-trivial share of the observed amplification effects, and an extension to human capital externalities can quantitatively match the empirical evidence.
Keywords:
time preference; comparative development; factor accumulation
JEL-Classification:
D03; D90; O10; O30; O40
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Discussion Paper No. 263
December 22, 2020

Decisions and Performance Under Bounded Rationality: A Computational Benchmarking Approach

Author:

Zegners, Dainis (Erasmus University Rotterdam)
Sunde, Uwe (LMU Munich)
Strittmatter, Anthony (CREST-ENSAE)

Abstract:

This paper presents a novel approach to analyze human decision-making that involves comparing the behavior of professional chess players relative to a computational benchmark of cognitively bounded rationality. This benchmark is constructed using algorithms of modern chess engines and allows investigating behavior at the level of individual move-by-move observations, thus representing a natural benchmark for computationally bounded optimization. The analysis delivers novel insights by isolating deviations from this benchmark of bounded rationality as well as their causes and consequences for performance. The findings document the existence of several distinct dimensions of behavioral deviations, which are related to asymmetric positional evaluation in terms of losses and gains, time pressure, fatigue, and complexity. The results also document that deviations from the benchmark do not necessarily entail worse performance. Faster decisions are associated with more frequent deviations from the benchmark, yet they are also associated with better performance. The findings are consistent with an important influence of intuition and experience, thereby shedding new light on the recent debate about computational rationality in cognitive processes.

Keywords:

cognitively bounded rationality; benchmark computing; artificial intelligence; decision quality; decision time

JEL-Classification:

D01; D09; C07; C08

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Discussion Paper No. 262
November 10, 2020

National Identity and the Integration of Second-Generation Immigrants

Author:

Monscheuer, Ole (HU Berlin)

Abstract:

This paper studies the effect of immigrants' national identity on integration in an inter-generational context. Economic theory predicts that the origin country identity of immigrants affects their children's integration through its effects on social network choices and incentives to invest in country-specific human capital. Yet, it is difficult to identify these effects empirically due to potential endogeneity. The empirical analysis of this paper relies on a novel IV strategy inspired by the epidemiological approach, and exploits rich survey data from the U.S. Results show that children whose parents are strongly attached to their origin country have less contact to natives and develop a stronger origin country identity. Consistent with the theoretical argument, they speak English less frequently and more poorly, and perform worse in school compared to peers whose parents are less attached to their origin country. Additional results from the CPS suggest that there exist negative long-term effects on labor market outcomes.

JEL-Classification:

F22; J15; Z13

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