Discussion Paper No. 489
December 29, 2023
How to Increase Public Support for Carbon Pricing
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The public acceptability of a carbon price depends on how the revenues from carbon pricing are used. In a fully incentivised experiment with a large representative sample of the German population, we compare five different revenue recycling schemes and show that support for a carbon price is maximised by a “Climate Premium” that pays a fixed, uniform, upfront payment to each person. This recycling scheme receives more support than tax and dividend schemes, than using revenues for the general budget of the government, and than earmarking revenues for environmental projects. Furthermore, we show that participants and experts underestimate the public support for carbon pricing.
Keywords:
carbon pricing; pigovian taxation; political support for carbon taxes; survey experiments;
JEL-Classification:
H23; P18; C9; D9;
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Discussion Paper No. 470
December 9, 2023
Uncertainty about Carbon Impact and the Willingness to Avoid CO2 Emissions
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With a large representative survey (N=1,128), we document that consumers are very uncertain about the emissions associated with various actions, which may affect their willingness to reduce their carbon footprint. We experimentally test two channels for the behavioural impact of such uncertainty, namely risk aversion about the impact of mitigating actions and the formation of motivated beliefs about this impact. In two large online experiments (N=2,219), participants make incentivized trade-offs between personal gain and (uncertain) carbon impact. We find no evidence that uncertainty affects individual climate change mitigation efforts through risk aversion or motivated belief channels. The results suggest that reducing consumer uncertainty through information campaigns is not a policy panacea and that communicating scientific uncertainty around climate impact need not backfire.
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Discussion Paper No. 461
November 24, 2023
Loss Aversion
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Loss aversion postulates that people prefer avoiding losses over acquiring gains of equal size. It is a central part of prospect theory and, according to Daniel Kahneman, “the most significant contribution of psychology to behavioral economics” (Kahneman, 2011, p. 300). It has powerful implications for decision theory and has been fruitfully applied in many subfields of economics. However, because the reference point is often not well defined and loss aversion interacts with other behavioral biases, there is some controversy about the concept.
Keywords:
loss aversion; reference point; prospect theory; endowment effect; decision theory; risk;
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Discussion Paper No. 444
November 9, 2023
Deceptive Communication: Direct Lies vs. Ignorance, Partial-Truth and Silence
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In cases of conflict of interest, people can lie directly or evade the truth. We analyse this situation theoretically and test the key behavioural predictions in a novel sender-receiver game. We find senders prefer to deceive through evasion rather than direct lying, more so when evasion is a partial-truth. This is because they do not want to deceive others nor be seen as deceptive. Receivers are sensitive to the deceptive language and more likely to act in senders’ favour when these lie directly. Our findings suggest dishonesty is more prevalent and costlier than previous best estimates focusing on direct lies.
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JEL-Classification:
C91; D82; D91;
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Discussion Paper No. 443
Getting it Right: Communication, Voting, and Collective Truth Finding
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We conduct an experiment in which groups are tasked with evaluating the truth of a set of politically relevant facts and statements, and we investigate whether communication improves information aggregation and the accuracy of group decisions. Our findings suggest that the effect of communication depends on the underlying accuracy of individual judgments. Communication improves accuracy when individuals tend to be incorrect, but diminishes it when individuals are likely to be correct ex ante. We also find that when groups vote independently without communicating, subjects update their beliefs in a manner consistent with interpreting others' votes as mildly informative signals, but not when they communicate beforehand. The chat analysis suggests that group members use communication to present their knowledge of related facts and to engage in interactive reasoning. Moreover, the volume of both types of communication increases with item difficulty.
Keywords:
collective decisions; voting; communication;
JEL-Classification:
D70; D72; D83;
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Discussion Paper No. 430
October 13, 2023
Organizational Change and Reference-Dependent Preferences
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Reference-dependent preferences can explain several puzzling observations about organizational change. We introduce a dynamic model in which a loss-neutral firm bargains with loss-averse workers over organizational change and wages. We show that change is often stagnant or slow for long periods followed by a sudden boost in productivity during a crisis. Moreover, it accounts for the fact that different firms in the same industry often have significant productivity differences. The model also demonstrates the importance of expectation management even if all parties have rational expectations. Social preferences explain why it may be optimal to divide a firm into separate entities.
Keywords:
organizational change; productivity; reference points; loss aversion; social preferences;
JEL-Classification:
D23; D91; L2;
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Discussion Paper No. 380
February 8, 2023
Self-serving Bias in Redistribution Choices: Accounting for Beliefs and Norms
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People with higher-incomes tend to support less redistribution than lower-income people. This has been attributed not only to self-interest, but also to psychological mechanisms including differing beliefs about the hard work or luck underlying inequality, differing fairness views, and differing perceptions of social norms. In this study, we directly measure each of these mechanisms and compare their mediating roles in the relationship between status and redistribution. In our experiment, participants complete real-effort tasks and then are randomly assigned a high or low pay rate per correct answer to exogenously induce (dis)advantaged status. Participants are then paired and those assigned the role of dictator decide how to divide their joint earnings. We find that advantaged dictators keep more for themselves than disadvantaged dictators and report different fairness views and beliefs about task performance, but not different beliefs about social norms. Further, only fairness views play a significant mediating role between status and allocation differences, suggesting this is the primary mechanism underlying self-serving differences in support for redistribution.
Keywords:
redistribution; self-serving bias; fairness; norms; online experiments;
JEL-Classification:
C91; D63; D83;
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Discussion Paper No. 322
March 23, 2022
Microfinance Loan Officers Before and During Covid-19: Evidence from India
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The Microfinance industry has been severely affected by Covid-19. We provide detailed insights into how loan officers, the key personnel linking the lender to its borrowers, are affected in their performance and adapt their work to the pandemic. We use administrative records of an Indian Microfinance Institution and detailed panel survey data on performance, performed tasks, and work organization to document how the work environment became more challenging during the pandemic. Loan officers operate in a setting where work from home is hard to implement due to the nature of the tasks and technological constraints. The usual performance indicators appear to be mainly driven by external factors such as the nation-wide debt moratorium. Loan officers worked similar hours, but engaged less in planning activities and completed fewer of the usual tasks. Work perceptions and mental health of loan officers reflect these changes, and perceived stress was particularly high during the period of the debt moratorium.
Keywords:
microfinance; loan officers; covid-19; work organization; India;
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Discussion Paper No. 320
February 24, 2022
Social Media and Mental Health
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The diffusion of social media coincided with a worsening of mental health conditions among adolescents and young adults in the United States, giving rise to speculation that social media might be detrimental to mental health. In this paper, we provide the first quasi-experimental estimates of the impact of social media on mental health by leveraging a unique natural experiment: the staggered introduction of Facebook across U.S. colleges. Our analysis couples data on student mental health around the years of Facebook’s expansion with a generalized difference-in-differences empirical strategy. We find that the roll-out of Facebook at a college increased symptoms of poor mental health, especially depression, and led to increased utilization of mental healthcare services. We also find that, according to the students’ reports, the decline in mental health translated into worse academic performance. Additional evidence on mechanisms suggests the results are due to Facebook fostering unfavorable social comparisons.
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Discussion Paper No. 306
December 1, 2021
Self-Persuasion: Evidence from Field Experiments at International Debating Competitions
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Laboratory evidence shows that when people have to argue for a given position, they persuade themselves about the position’s factual and moral superiority. Such self-persuasion limits the potential of communication to resolve conflict and reduce polarization. We test for this phenomenon in a field setting, at international debating competitions that randomly assign experienced and motivated debaters to argue one side of a topical motion. We find self-persuasion in factual beliefs and confidence in one’s position. Effect sizes are smaller than in the laboratory, but robust to a one-hour exchange of arguments and a ten-fold increase in incentives for accuracy.
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