Discussion Paper No. 446
November 9, 2023
Round-Number Effects in Real Estate Prices: Evidence from Germany
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Abstract:
Round numbers affect behavior in various domains, e.g., as prominent thresholds or focal points in bargaining. In line with earlier findings, residential real estate transactions in Germany cluster at round-number prices, but there are also interesting (presumably cultural) differences. We extend our analysis to the commercial real estate market, where stakes are even higher and market participants arguably more experienced. For the same type of object, professionals cluster significantly less on round-number prices compared to non-professionals. We employ machine learning and show that transactions of family homes and condominiums at round-number prices are 2–7% above their hedonic values.
Keywords:
round-number effects; focal points; residential real estate; commercial real estate; housing prices; machine learning;
JEL-Classification:
D01; D91; C78; R31;
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Discussion Paper No. 445
The Efficacy of Tournaments for Non-Routine Team Tasks
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Abstract:
Tournaments are often used to improve performance in innovation contexts. Tournaments provide monetary incentives but also render teams' identity and image concerns salient. We study the effects of tournaments on team performance in a non-routine task and identify the importance of these behavioral aspects. In a field experiment (n>1,700 participants), we vary the salience of team identity, social image concerns, and whether teams face monetary incentives. Increased salience of team identity does not improve performance. Social image motivates the top performers. Additional monetary incentives improve all teams' outcomes without crowding out teams' willingness to explore or perform similar tasks again.
Keywords:
team work; tournaments; rankings; incentives; identity; image concerns; innovation; exploration; natural field experiment;
JEL-Classification:
C93; D90; J24; J33; M52;
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Discussion Paper No. 441
November 1, 2023
The Lifecycle of Affirmative Action Policies and Its Effect on Effort and Sabotage Behavior
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Abstract:
A main goal of affirmative action (AA) policies is to enable disadvantaged groups to compete with their privileged counterparts. Existing theoretical and empirical research documents that incorporating AA can result in both more egalitarian outcomes and higher exerted efforts. However, the direct behavioral effects of the introduction and removal of such policies are still under-researched. It is also unclear how specific AA policy instruments, for instance, head-start for a disadvantaged group or handicap for the privileged group, affect behavior. We examine these questions in a laboratory experiment in which individuals participate in a real-effort tournament and can sabotage each other. We find that AA does not necessarily result in higher effort. High performers that already experienced an existing AA-free tournament reduce their effort levels after the introduction of the AA policy. Additionally, we observe less sabotage under AA when the tournament started directly with the AA regime. The removal of AA policies, however, significantly intensifies sabotage. Finally, there are no overall systematic differences between handicap and head-start in terms of effort provision or sabotaging behavior.
Keywords:
affirmative action; sabotage; experiment; tournament; handicap; head-start;
JEL-Classification:
C720; C910; D630; D720;
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Discussion Paper No. 416
August 10, 2023
Complementing Business Training with Access to Finance: Evidence from SMEs in Kenya
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Abstract:
In this paper, we study the complementarity between business training and access to financial capital for small and medium enterprises (SMEs) in Kenya. All participants in a business training program are offered training. One-third of participants are offered loans immediately after training (Concurrent Loan group), one-third are offered loans six weeks after training (Delayed Loan group), and the remaining third are offered loans after another four weeks (Control group). While a long delay between training and loans may reduce knowledge retention and application by SMEs in the presence of complementarity, concurrent access to loans and associated business spending may crowd out the entrepreneurs' attention from improving business practices. We find evidence for the latter in both intention-to-treat and treatment-on-the-treated estimates. While SMEs in both Control and Delayed Loan groups improve their business practices, SMEs in the Concurrent Loan group who take loans do not improve their practices at all. Moreover, entrepreneurs who take loans spend less time on their businesses and their business revenue falls. Our evidence is consistent with the entrepreneurs in our study using loans to substitute for their income.
Keywords:
business training; access to finance;
JEL-Classification:
O12; L26; M53;
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Discussion Paper No. 412
August 5, 2023
Employee Performance and Mental Well-Being: The Mitigating Effects of Transformational Leadership during Crisis
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Abstract:
The positive role of transformational leadership on productivity and mental wellbeing has long been established. Transformational leadership behavior may be particularly suited to navigate times of crisis which are characterized by high levels of complexity and uncertainty. We exploit quasi-random assignment of employees to managers and study the role of frontline managers’ leadership styles on employees’ performance, work style, and mental well-being in times of crisis. Using longitudinal administrative data and panel survey data from before and during the Covid-19 pandemic, we find that frontline managers who were perceived as having a more transformational leadership style before the onset of the pandemic, lead employees to better performance and mental well-being during the pandemic.
Keywords:
leadership; frontline managers; labor-management relations; organizational behavior;
JEL-Classification:
M54; M12; J53;
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Discussion Paper No. 401
June 16, 2023
The Lifecycle of Affirmative Action Policies and Its Effect on Effort and Sabotage Behavior
Author:
Abstract:
A main goal of affirmative action (AA) policies is to enable disadvantaged groups to compete with their privileged counterparts. Existing theoretical and empirical research documents that incorporating AA can result in both more egalitarian outcomes and higher exerted efforts. However, the direct behavioral effects of the introduction and removal of such policies are still under-researched. It is also unclear how specific AA policy instruments, for instance, head-start for a disadvantaged group or handicap for the privileged group, affect behavior. We examine these questions in a laboratory experiment in which individuals participate in a real-effort tournament and can sabotage each other. We find that AA does not necessarily result in higher effort. High performers that already experienced an existing AA-free tournament reduce their effort levels after the introduction of the AA policy. Additionally, we observe less sabotage under AA when the tournament started directly with the AA regime. The removal of AA policies, however, significantly intensifies sabotage. Finally, there are no overall systematic differences between handicap and head-start in terms of effort provision or sabotaging behavior.
Keywords:
affirmative action; sabotage; experiment; tournament; handicap; head-start;
JEL-Classification:
C72; C91; D63; D72;
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Discussion Paper No. 400
June 15, 2023
Responsibility-Shifting through Delegation: Evidence from China’s One-Child Policy
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Abstract:
We provide evidence on how responsibility-shifting through delegation occurred in China’s implementation of the one-child policy. We show that trust in local governments was reduced when they were the primary enforcer of the policy (1979–1990), while trust in neighbors was reduced when civilians were incentivized to report neighbors’ violations of the policy to the authorities (1991–2015). This effect was more pronounced among parents of a firstborn daughter, who were more likely to violate the policy due to the deep-rooted son preference. This study provides the first set of field evidence on the responsibility-shifting effect of delegation.
Keywords:
delegation; responsibility-shifting; One-Child policy;
JEL-Classification:
D02; D04; D90; J18;
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Discussion Paper No. 397
May 15, 2023
Management and Performance in the Public Sector: Evidence from German Municipalities
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Abstract:
We study management practices and performance in a representative sample of German municipalities, which provide the bulk of direct administrative services for citizens and firms in Germany. Surveyed municipalities differ substantially in their use of structured management practices, and this heterogeneity is also pronounced within all federal states, regional types, and population size brackets. Moreover, we document a systematic positive relationship between the degree of structured management and a diverse set of performance measures capturing municipalities' attractiveness for citizens and firms. Topic modelling (LDA) of survey responses suggests that the predominant management style is to use relatively little structured management.
Keywords:
management practices; public sector organizations; local government; municipal performance; state capacity; World Management Survey (WMS);
JEL-Classification:
D20; D73; H11; H73; R50;
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Discussion Paper No. 395
Pay Transparency in Organizations
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Abstract:
I study when a firm prefers to be transparent about pay using a simple multidimensional signaling model. Pay transparency within the firm means that a worker can learn about his own worker-firm match from another worker’s pay. This can either encourage or discourage workers—which affects retention—and so creates a trade-off for the firm when it commits to a level of transparency. The model pre- dicts that when few workers have a high worker-firm match, transparency is always preferred by the firm and becomes more favorable as the value of retaining these ‘star’ workers increases. This prediction is consistent with the firms in the field that choose to be internally transparent about pay. The model also predicts that transparency leads to pay compression, again consistent with evidence from the field.
Keywords:
pay transparency; bonus pay; multidimensional signaling; relative pay;
JEL-Classification:
D82; D86; J30; M52;
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Discussion Paper No. 394
Communicating Preferences to Improve Recommendations
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Abstract:
I study a cheap talk model between a buyer and a seller with two goods for sale. There is two-sided (independent) private information with sequential, two-way communication. In the first stage, the buyer communicates her private preferences to the seller. In the second stage, the seller communicates the quality of the goods to the buyer. When the buyer’s preference is about which attribute common to both goods she prefers, the seller strictly benefits from the buyer communicating her preferences. Whereas when the buyer’s preference is about which good she prefers, this is never the case.
Keywords:
cheap talk; strategic communication; product recommendations;
JEL-Classification:
D82; L15;