Discussion Paper No. 380
February 8, 2023
Self-serving Bias in Redistribution Choices: Accounting for Beliefs and Norms
Author:
Abstract:
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;
Download:
Discussion Paper No. 322
March 23, 2022
Microfinance Loan Officers Before and During Covid-19: Evidence from India
Author:
Abstract:
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;
JEL-Classification:
Download:
Discussion Paper No. 320
February 24, 2022
Social Media and Mental Health
Author:
Abstract:
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.
Keywords:
JEL-Classification:
Download:
Discussion Paper No. 306
December 1, 2021
Self-Persuasion: Evidence from Field Experiments at International Debating Competitions
Author:
Abstract:
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.
Keywords:
JEL-Classification:
Download:
Discussion Paper No. 305
Cursed Consumers and the Effectiveness of Consumer Protection Policies
Author:
Abstract:
We model firms’ quality disclosure and pricing in the presence of cursed consumers, who fail to be sufficiently skeptical about undisclosed quality. We show that cursed consumers are exploited in duopoly markets if firms are vertically differentiated, if there are few cursed consumers, and if average product quality is high. Three common consumer protection policies that work under monopoly, i.e. mandatory disclosure, third party disclosure and consumer education, may all increase exploitation and decrease welfare. Even where these policies improve overall welfare, they often lead to a reduction in consumer surplus. We show that our conclusions hold in extensions with endogenous quality choice and horizontal differentiation.
Keywords:
naive; cursed; disclosure; consumer protection; labeling; competition;
JEL-Classification:
Download:
Discussion Paper No. 304
Spin Doctors: An Experiment on Vague Disclosure
Author:
Abstract:
Unfavorable news are often delivered under the disguise of vagueness. Our theory-driven laboratory experiment investigates this strategic use of vagueness in voluntary disclosure and asks whether there is scope for policy to improve information transmission. We find that vagueness is profitably deployed by senders to fool those receivers that lack strategic sophistication. Imposing precise disclosure leads to more easily interpretable messages, but results in fewer sender types disclosing at all. Since non- disclosure also systematically misleads naive receivers, the welfare implications of imposing precision are not obvious. However, our model and experiment show that information transmission and the welfare of naive receivers are improved by policies that impose precision. Our results speak to the rules governing firms’ disclosure of quality-relevant information, the disclosure of research findings, and testimonies in a court of law.
Keywords:
communication; naïveté; flexibility; regulation;
JEL-Classification:
Download:
Discussion Paper No. 288
November 10, 2021
Decomposing the Disposition Effect
Author:
Abstract:
We theoretically show that there is a fundamental disconnect be- tween the disposition effect, i.e., investors’ tendency to sell winning assets too early and losing assets too late, and its common empirical measure, namely a positive difference between the proportion of gains and losses re- alized. While its common measure cannot identify the disposition effect, it identifies the presence of some systematic bias. We further investigate the measure’s comparative statics regarding markets, investors’ informa- tion level, and their attention. Besides generating novel testable predictions, this analysis reveals that, in contrast to the measure’s sign, variations in its magnitude are informative for its cause.
Keywords:
disposition effect; rational benchmark; investor behavior; behavioral biases; market segments; financial attention; information level;
JEL-Classification:
Download:
Discussion Paper No. 275
Meta-Analysis of Empirical Estimates of Loss-Aversion
Author:
Abstract:
Loss aversion is one of the most widely used concepts in behavioral economics. We conduct a large-scale interdisciplinary meta-analysis, to systematically accumulate knowledge from numerous empirical estimates of the loss aversion coefficient reported during the past couple of decades. We examine 607 empirical estimates of loss aversion from 150 articles in economics, psychology, neuroscience, and several other disciplines. Our analysis indicates that the mean loss aversion coefficient is between 1.8 and 2.1. We also document how reported estimates vary depending on the observable characteristics of the study design.
Keywords:
loss aversion; prospect theory; meta-analysis;
JEL-Classification:
Download:
Discussion Paper No. 272
Prices versus Quantities with Morally Concerned Consumers
Author:
Abstract:
It is widely believed that an environmental tax (price regulation) and cap-and-trade (quantity regulation) are equally efficient in controlling pollution when there is no uncertainty. We show that this is not the case if some consumers (firms, local governments) are morally concerned about pollution and the pollution price is inefficiently low for political reasons. Emissions are lower and material welfare is higher with price regulation. Furthermore, quantity regulation gives rise to dysfunctional incentive and distribution effects. It shifts the burden of adjustment to the poor and discourages voluntary efforts to reduce pollution, while price regulation makes these efforts effective.
Keywords:
emissions trading; carbon tax; climate change; prices versus quantities; behavioral industrial organization;
JEL-Classification:
Download:
Discussion Paper No. 270
Das Design von Klimaschutzverhandlungen
Author:
Abstract:
In seiner Thünen-Vorlesung vor dem Verein für Socialpolitik im Herbst 2020 hat Klaus Schmidt das Design von Klimaschutzverhandlungen untersucht. Er geht dabei von einem Vorschlag Martin Weitzmans aus, künftige Verhandlungen auf einen einheitlichen CO2-Mindestpreis zu fokussieren. Wäre ein solches Vorgehen demjenigen, wie es in den Abkommen von Paris und Kyoto praktiziert wurde, tatsächlich überlegen? Schmidt berichtet von zwei experimentellen Studien, in denen er gemeinsam mit Koautoren Licht auf diese Frage geworfen hat. Die Ergebnisse beider Studien unterstützen den Vorschlag von Weitzman.
Keywords:
Klimaschutzverhandlungen; Verhandlungsdesign; Reziprozität; CO2-Preis;
JEL-Classification: