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We conduct a laboratory experiment to study how locus of control operates through people's preferences and beliefs to influence their decisions. Using the principal-agent setting of the delegation game, we test four key channels that conceptually link locus of control to decision-making: (i) preference for agency; (ii) optimism and (iii) confidence regarding the return to effort; and (iv) illusion of control. Knowing the return and cost of stated effort, principals either retain or delegate the right to make an investment decision that generates payoffs for themselves and their agents. Extending the game to the context in which the return to stated effort is unknown allows us to explicitly study the relationship between locus of control and beliefs about the return to effort. We find that internal locus of control is linked to the preference for agency, an effect that is driven by women. We find no evidence that locus of control influences optimism and confidence about the return to stated effort, or that it operates through an illusion of control.
We use the prolonged Greek crisis as a case study to understand how a lasting economic shock affects the innovation strategies of firms in economies with moderate innovation activities. Adopting the 3-stage CDM model, we explore the link between R&D, innovation, and productivity for different size groups of Greek manufacturing firms during the prolonged crisis. At the first stage, we find that the continuation of the crisis is harmful for the R&D engagement of smaller firms while it increased the willingness for R&D activities among the larger ones. At the second stage, among smaller firms the knowledge production remains unaffected by R&D investments, while among larger firms the R&D decision is positively correlated with the probability of producing innovation, albeit the relationship is weakened as the crisis continues. At the third stage, innovation output benefits only larger firms in terms of labor productivity, while the innovation-productivity nexus is insignificant for smaller firms during the lasting crisis.
Paid parental leave schemes have been shown to increase women’s employment rates but to decrease their wages in case of extended leave duration. In view of these potential trade-offs, many countries are discussing the optimal design of parental leave policies. We analyze the impact of a major parental leave reform on mothers’ long-term earnings. The 2007 German parental leave reform replaced a means-tested benefit with a more generous earnings-related benefit that is granted for a shorter period of time. Additionally, a ”daddy quota” of two months was introduced. To identify the causal effect of this policy mix on long-run earnings of mothers, we use a difference-in-differences approach that compares labor market outcomes of mothers who gave birth just before and right after the reform and nets out seasonal effects by including the year before. Using administrative social security data, we confirm previous findings and show that the average duration of employment interruptions increased for mothers with high pre-birth earnings. Nevertheless, we find a positive long-run effect on earnings for mothers in this group. This effect cannot be explained by changes in the selection of working mothers, working hours or changes in employer stability. Descriptive evidence suggests that the stronger involvement of fathers, incentivized by the ”daddy months”, could have facilitated mothers’ re-entry into the labor market and thereby increased earnings. For mothers with low pre-birth earnings, however, we do not find beneficial long-run effects of this parental leave reform.
Predicting entrepreneurial development based on individual and business-related characteristics is a key objective of entrepreneurship research. In this context, we investigate whether the motives of becoming an entrepreneur influence the subsequent entrepreneurial development. In our analysis, we examine a broad range of business outcomes including survival and income, as well as job creation, and expansion and innovation activities for up to 40 months after business formation. Using the self-determination theory as conceptual background, we aggregate the start-up motives into a continuous motivational index. We show – based on a unique dataset of German start-ups from unemployment and non-unemployment – that the later business performance is better, the higher they score on this index. Effects are particularly strong for growth-oriented outcomes like innovation and expansion activities. In a next step, we examine three underlying motivational categories that we term opportunity, career ambition, and necessity. We show that individuals driven by opportunity motives perform better in terms of innovation and business expansion activities, while career ambition is positively associated with survival, income, and the probability of hiring employees. All effects are robust to the inclusion of a large battery of covariates that are proven to be important determinants of entrepreneurial performance.
This paper sheds new light on the role of communication for cartel formation. Using machine learning to evaluate free-form chat communication among firms in a laboratory experiment, we identify typical communication patterns for both explicit cartel formation and indirect attempts to collude tacitly. We document that firms are less likely to communicate explicitly about price fixing and more likely to use indirect messages when sanctioning institutions are present. This effect of sanctions on communication reinforces the direct cartel-deterring effect of sanctions as collusion is more difficult to reach and sustain without an explicit agreement. Indirect messages have no, or even a negative, effect on prices.
The leniency rule revisited
(2021)
The experimental literature on antitrust enforcement provides robust evidence that communication plays an important role for the formation and stability of cartels. We extend these studies through a design that distinguishes between innocuous communication and communication about a cartel, sanctioning only the latter. To this aim, we introduce a participant in the role of the competition authority, who is properly incentivized to judge the communication content and price setting behavior of the firms. Using this novel design, we revisit the question whether a leniency rule successfully destabilizes cartels. In contrast to existing experimental studies, we find that a leniency rule does not affect cartelization. We discuss potential explanations for this contrasting result.
COVID-19
(2021)
We investigate how the economic consequences of the pandemic and the government-mandated measures to contain its spread affect the self-employed — particularly women — in Germany. For our analysis, we use representative, real-time survey data in which respondents were asked about their situation during the COVID-19 pandemic. Our findings indicate that among the self-employed, who generally face a higher likelihood of income losses due to COVID-19 than employees, women are about one-third more likely to experience income losses than their male counterparts. We do not find a comparable gender gap among employees. Our results further suggest that the gender gap among the self-employed is largely explained by the fact that women disproportionately work in industries that are more severely affected by the COVID-19 pandemic. Our analysis of potential mechanisms reveals that women are significantly more likely to be impacted by government-imposed restrictions, e.g., the regulation of opening hours. We conclude that future policy measures intending to mitigate the consequences of such shocks should account for this considerable variation in economic hardship.
Previous literature has shown that task-based goal-setting and distributed learning is beneficial to university-level course performance. We investigate the effects of making these insights salient to students by sending out goal-setting prompts in a blended learning environment with bi-weekly quizzes. The randomized field experiment in a large mandatory economics course shows promising results: the treated students outperform the control group. They are 18.8% (0.20 SD) more likely to pass the exam and earn 6.7% (0.19 SD) more points on the exam. While we cannot causally disentangle the effects of goal-setting from the prompt sent, we observe that treated students use the online learning platform earlier in the semester and attempt more online exercises compared to the control group. The heterogeneity analysis suggests that higher treatment effects are associated with low performance at the beginning of the course.
Who has the future in mind?
(2022)
An individual's relation to time may be an important driver of pro-environmental behaviour. We studied whether young individual's gender and time-orientation are associated with pro-environmental behaviour. In a controlled laboratory environment with students in Germany, participants earned money by performing a real-effort task and were then offered the opportunity to invest their money into an environmental project that supports climate protection. Afterwards, we controlled for their time-orientation. In this consequential behavioural setting, we find that males who scored higher on future-negative orientation showed significantly more pro-environmental behaviour compared to females who scored higher on future-negative orientation and males who scored lower on future-negative orientation. Interestingly, our results are completely reversed when it comes to past-positive orientation. These findings have practical implications regarding the most appropriate way to address individuals in order to achieve more pro-environmental behaviour.
This paper studies how individuals discount the utility they derive from their provision of goods over spatial distance. In a controlled laboratory experiment in Germany, we elicit preferences for the provision of the same good at different locations. To isolate spatial preferences from any other direct value of the goods being close to the individual, we focus on goods with “existence value.” We find that individuals put special weight on the provision of these goods in their immediate vicinity. This “vicinity bias” represents a spatial analogy to the “present bias” in the time dimension.
Charitable giving
(2023)
We investigate how different levels of information influence the allocation decisions of donors who are entitled to freely distribute a fixed monetary endowment between themselves and a charitable organization in both giving and taking frames. Participants donate significantly higher amounts, when the decision is described as taking rather than giving. This framing effect becomes smaller if more information about the charity is provided.
Labor unions’ greatest potential for political influence likely arises from their direct connection to millions of individuals at the workplace. There, they may change the ideological positions of both unionizing workers and their non-unionizing management. In this paper, we analyze the workplace-level impact of unionization on workers’ and managers’ political campaign contributions over the 1980-2016 period in the United States. To do so, we link establishment-level union election data with transaction-level campaign contributions to federal and local candidates. In a difference-in-differences design that we validate with regression discontinuity tests and a novel instrumental variables approach, we find that unionization leads to a leftward shift of campaign contributions. Unionization increases the support for Democrats relative to Republicans not only among workers but also among managers, which speaks against an increase in political cleavages between the two groups. We provide evidence that our results are not driven by compositional changes of the workforce and are weaker in states with Right-to-Work laws where unions can invest fewer resources in political activities.
In the past years, work-time in many industries has become more flexible, opening up a new channel for intertemporal substitution: workers might, instead of saving, adjust their work-time to smooth consumption. To study this channel, we set up a two-period consumption/saving model with wage uncertainty. This extends the standard saving model by also allowing a worker to allocate a fixed time budget between two work-shifts. To test the comparative statics implied by these two different channels, we conduct a laboratory experiment. A novel feature of our experiments is that we tie income to a real-effort style task. In four treatments, we turn on and off the two channels for consumption smoothing: saving and time allocation. Our main finding is that savings are strictly positive for at least 85 percent of subjects. We find that a majority of subjects also uses time allocation to smooth consumption and use saving and time shifting as substitutes, though not perfect substitutes. Part of the observed heterogeneity of precautionary behavior can be explained by risk preferences and motivations different from expected utility maximization. (c) 2021 Elsevier B.V. All rights reserved.
Many phenomena of high relevance for economic development such as human capital, geography and climate vary considerably within countries as well as between them. Yet, global data sets of economic output are typically available at the national level only, thereby limiting the accuracy and precision of insights gained through empirical analyses. Recent work has used interpolation and downscaling to yield estimates of sub-national economic output at a global scale, but respective data sets based on official, reported values only are lacking. We here present DOSE — the MCC-PIK Database Of Sub-national Economic Output. DOSE contains harmonised data on reported economic output from 1,661 sub-national regions across 83 countries from 1960 to 2020. To avoid interpolation, values are assembled from numerous statistical agencies, yearbooks and the literature and harmonised for both aggregate and sectoral output. Moreover, we provide temporally- and spatially-consistent data for regional boundaries, enabling matching with geo-spatial data such as climate observations. DOSE provides the opportunity for detailed analyses of economic development at the subnational level, consistent with reported values.
Income inequality and taxes
(2023)
Economic literature offers several distinct explanations for the raising income inequality observed in several countries. In the debate about the causes of inequality a growing strand of research focuses on the effects of taxation on income inequality. We contribute to this literature by providing a systematic empirical account of the relationship between income inequality and personal income taxation (PIT) for a set of countries over the period 1981–2005. In order to take alternative explanations into account and to isolate the effects of tax progressivity, we include a wide range of control variables. We address potential reverse causality between inequality and PIT by using the variation in tax schedules of neighbouring countries. Our results confirm a statistically significant negative association between the progressivity of PIT and income inequality. Overall, we find that especially the average and the marginal tax rate have the potential to reduce income inequality. This finding is qualitatively robust across various different empirical specifications.
Although the literature on the determinants of training has considered individual and firm-related characteristics, it has generally neglected regional factors. This is surprising, given the fact that labour markets differ by regions. Regional factors are often ignored because (both in Germany and abroad) many data sets covering training information do not include detailed geographical identifiers that would allow a merging of information on the regional level. The regional identifiers of the National Educational Panel Study (Starting Cohort 6) offer opportunities to advance research on several regional factors. This article summarizes the results from two studies that exploit these unique opportunities to investigate the relationship between training participation and (a) the local level of firm competition for workers within specific sectors of the economy and (b) the regional supply of training measured as the number of firms offering courses or seminars for potential training participants.
Personal data increasingly serve as inputs to public goods. Like other types of contributions to public goods, personal data are likely to be underprovided. We investigate whether classical remedies to underprovision are also applicable to personal data and whether the privacy-sensitive nature of personal data must be additionally accounted for. In a randomized field experiment on a public online education platform, we prompt users to complete their profiles with personal information. Compared to a control message, we find that making public benefits salient increases the number of personal data contributions significantly. This effect is even stronger when additionally emphasizing privacy protection, especially for sensitive information. Our results further suggest that emphasis on both public benefits and privacy protection attracts personal data from a more diverse set of contributors.
Does loss aversion apply to social image concerns? In a laboratory experiment, we first induce social image in a relevant domain, intelligence, through public ranking. In a second stage, subjects experience a change in rank and are offered scope for lying to improve their final, also publicly reported rank. Subjects who care about social image and experience a decline in rank lie more than those experiencing gains. Moreover, we document a discontinuity in lying behavior when moving from rank losses to gains. Our results are in line with loss aversion in social image concerns.
Atwood analyzes the effects of the 1963 U.S. measles vaccination on long-run labor market outcomes, using a generalized difference-in-differences approach. We reproduce the results of this paper and perform a battery of robustness checks. Overall, we confirm that the measles vaccination had positive labor market effects. While the negative effect on the likelihood of living in poverty and the positive effect on the probability of being employed are very robust across the different specifications, the headline estimate—the effect on earnings—is more sensitive to the exclusion of certain regions and survey years.
Using data from the German Socio-Economic Panel and exploiting the staggered implementation of a compulsory schooling reform in West Germany, this article finds that an additional year of schooling lowers the probability of being very concerned about immigration to Germany by around six percentage points (20 percent). Furthermore, our findings imply significant spillovers from maternal education to immigration attitudes of her offspring. While we find no evidence for returns to education within a range of labor market outcomes, higher social trust appears to be an important mechanism behind our findings.