economic profitability versus ecological entropy there is a long standing trade off in bioculture between concentrating on high yield varieties and maintaining sufficient diversity to lower the risks of catastrophic infection the paper uses a simple ecology based model of endogenous disease to indicate how a local decision to plant more of a widely grown crop creates negative externalities by increasing the probability that new pathogens will evolve to attack the crop globally society s basic issue concerns where to locate on an efficiency frontier between economic profitability and a standard formula for ecological entropy proved here to be a rigorous measure of generalized resistance to crop ecosystem failure

individual risk attitudes measurement determinants and behavioral consequences this paper studies risk attitudes using a large representative survey and a complementary experiment conducted with a representative subject pool in subjects homes using a question asking people about their willingness to take risks in general we find that gender age height and parental background have an economically significant impact on willingness to take risks the experiment confirms the behavioral validity of this measure using paid lottery choices turning to other questions about risk attitudes in specific contexts we find similar results on the determinants of risk attitudes and also shed light on the deeper question of stability of risk attitudes across contexts we conduct a horse race of the ability of different measures to explain risky behaviors such as holdings stocks occupational choice and smoking the question about risk taking in general generates the best all round predictor of risky behavior

risk preferences around the world we present results from a large scale international survey on risk preferences conducted in 53 countries in all countries we find on average an attitude of risk aversion in gains and of risk seeking in losses the degree of risk aversion shows significant cross country differences moreover risk attitudes in our sample depend not only on economic conditions but also on cultural factors as measured by the hofstede dimensions individualism and uncertainty avoidance the data may also serve as an interesting starting point for further research on cultural differences in behavioral economics data as supplemental material are available at http dx doi org 10 1287 mnsc 2013 1869 this paper was accepted by peter wakker decision analysis

the boundaries of loss aversion abstract in this article the authors propose some psychological principles to describe the boundaries of loss aversion a key idea is that exchange goods that are given up as intended do not exhibit loss aversion for example the authors propose that money given up in purchases is not generally subject to loss aversion the results of several experiments provide preliminary support for the hypotheses the authors find that consistent with prospect theory loss aversion provides a complete account of risk aversion for risks with equal probability to win or lose the authors propose boundaries for this result and suggest further tests of the model

corruption norm violation and decay in social capital the paper studies the link between corruption and social capital measured as trust using data from a lab experiment subjects play either a harassment bribery game or a strategically identical but differently framed ultimatum game followed by a trust game in a second experiment we elicit social appropriateness norm of actions in the bribery game and ultimatum game treatments our experimental design allows us to examine whether subjects who have been asked to pay a bribe are less likely to trust than those in an isomorphic role in the ultimatum game we also uncover the underlying mechanism behind any such behavioral spillover results suggest that a there is a negative spillover effect of corruption on trust and the effect increases with decrease in social appropriateness norm of the bribe demand b lower trust in the bribery game treatment is explained by lower expected return on trust c surprisingly for both the bribery and ultimatum game treatments social appropriateness norm violation engenders the decay in trust through its adverse effect on belief about trustworthiness

on representative social capital abstract this paper analyzes the behavior of subjects randomly drawn from the dutch population who reveal their capacity to provide and sustain social capital by their propensity to invest and reward investments in an economic experiment we find that heterogeneity in behavior is characterized by several asymmetries men the young and elderly and low educated individuals invest relatively less but reward significantly more investments the age effects are found to corroborate existing findings whereas those of gender and education do not higher expected levels of investments by others are found to have a positive and significant effect on own investments finally a laboratory experiment with student subjects is found to provide a lower bound of the population level of social capital

formative experiences and portfolio choice evidence from the finnish great depression we trace the impact of formative experiences on portfolio choice plausibly exogenous variation in workers exposure to a depression allows us to identify the effects and a new estimation approach makes addressing wealth and income effects possible we find that adversely affected workers are less likely to invest in risky assets this result is robust to a number of control variables and it holds for individuals whose income employment and wealth were unaffected the effects travel through social networks individuals whose neighbors and family members experienced adverse circumstances also avoid risky investments

are women really more risk averse than men a re analysis of the literature using expanded methods while a substantial literature in economics and finance has concluded that women are more risk averse than men this conclusion merits investigation after briefly clarifying the difference between making generalizations about groups on the one hand and making valid inferences from samples on the other this essay suggests improvements to how economists communicate our research results supplementing findings of statistical significance with quantitative measures of both substantive difference cohen s d a measure in common use in non economics literatures and of substantive overlap the index of similarity newly proposed here adds important nuance to the discussion of sex differences these measures are computed from the data on men women and risk used in 35 scholarly works from economics finance and decision science the results are considerably more mixed and overlapping than would commonly be inferred from the broad claims made in the literature with standardized differences in means mostly amounting to considerably less than one standard deviation and the degree of overlap between male and female distributions generally exceeding 80 in addition studies that look at contextual influences suggest that these contribute importantly to observations of differences both between and within the sexes

effects of household shocks on risk preferences and loss aversion evidence from upland smallholders of south east asia avoiding risk in financial decisions is credited to be a key contributor to persistent poverty and poverty traps in spite of this the methods used to measure behaviour under risk rarely reflect a

misperceived social norms women working outside the home in saudi arabia we show that the vast majority of young married men in saudi arabia privately support women working outside the home wwoh and substantially underestimate support by other similar men correcting these beliefs increases men s costly willingness to help their wives search for jobs months later wives of men whose beliefs were corrected are more likely to have applied and interviewed for a job outside the home in a recruitment experiment with a local company randomly informing women about actual support for wwoh leads them to switch from an at home temporary enumerator job to a higher paying outside the home version of the job

risk attitudes to low probability climate change risks wtp for flood insurance abstract natural disasters may increase in frequency and severity in the future as a result of climate change which is likely to have an impact on the demand for natural disaster insurance insights about individual risk beliefs and behavioural responses to changing risks are relevant for insurers as it allows them for example to estimate the demand for new insurance products that cover weather related damage this study elicits individual risk beliefs and the demand for low probability high impact flood insurance using the contingent valuation survey method among approximately 1000 homeowners in the dutch river delta this study is of practical relevance since currently flood insurance is not available in the netherlands while insurers have been considering to provide such insurance individuals generally do not behave in accordance with the expected utility model since a significant proportion of homeowners neglect the low probability flood risk the willingness to pay wtp of those individuals who demand flood insurance is on average considerably higher than the expected value of the flood risk they face moreover the wtp for flood insurance is less than proportionally related to increased flood probabilities that were presented to respondents in the questionnaire individuals follow a process of bayesian updating of flood probabilities since perceptions of flood risk are an important determinant of the wtp while objective risks derived from geographical characteristics influence the wtp to a lesser extent communication of baseline probabilities and changes in flood probabilities using risk ladders facilitate the comprehension of risk by respondents and has a considerable effect on the level of the wtp and its sensitivity to probability changes the results indicate that the current ex post public compensation scheme of flood damage lowers demand for private insurance

migrations risks and uncertainty a field experiment in china abstract we report data from the first incentivized artefactual field experiment conducted in china to understand whether chinese migrants differ from non migrants in terms of preferences regarding risk and uncertainty in various contexts we find that compared to non migrants migrants are significantly more likely to enter competitions when they expect competitive entries from others however migrants are not different from non migrants in risk and ambiguity preferences where strategic uncertainty is absent our results suggest that migration may be driven more by a stronger belief in one s chance of succeeding in an uncertain competitive environment than by differences risk attitudes related to state uncertainty

how do long shot outcomes affect preferences for climate change mitigation this article takes a fresh look at how public uncertainty influences willingness to pay wtp for climate change mitigation programs i elicit subjective distribution functions over future global mean temperatures and wtp for mitigation i find not surprisingly that subjects on average view climate change as a bad and the higher the expected temperature increase they perceive the more they are willing to pay for mitigation subjects are generally risk averse so that they are wtp more for mitigation programs when the outcome of the program is more certain the skew of the subjective climate change distribution also affects preferences so that aversion to catastrophic outcomes is an important component of wtp for mitigation i find that models that ignore skew are likely to underestimate the influence of uncertainty on willingness to pay for climate change mitigation

storm damage and risk preferences panel evidence from germany individuals risk preferences may change after experiencing external socio economic or natural shocks theoretical predictions and empirical studies suggest that risk taking may increase or decrease after experiencing shocks so far the empirical evidence is sparse especially when it comes to developed countries we contribute to this literature by investigating whether experiencing financial and health related damage caused by storms affects risk preferences of individuals in germany using unique panel data we find that household heads were more risk seeking after they experienced storm damage we do not find evidence of exposure to storm per se regardless of damage experience which suggests that household heads have to suffer damage for their risk preferences to be affected these results are robust across a battery of alternative model specifications and alternative storm damage measures magnitude of financial damage we rule out other potential explanations such as health related and economic shocks the self reported storm damage data is broadly confirmed by regional storm damage data provided by the insurance industry while we cannot identify the channels through which experiencing storm damage affects risk preferences from our data we suggest and discuss some potential channels the results may have important policy implications as risk preferences affect for instance individuals savings and investment behaviour adoption of self protection and self insurance strategies and technology adoption

the neuroeconomics of mind reading and empathy the most fundamental solution concepts in game theory nash equilibrium backward induction and iterated elimination of dominated strategies are based on the assumption that people are capable of predicting others actions these concepts require people to be able to view the game from the other players perspectives i e to understand others motives and beliefs economists still know little about what enables people to put themselves into others shoes and how this ability interacts with their own preferences and beliefs social neuroscience provides insights into the neural mechanism underlying our capacity to represent others intentions beliefs and desires referred to as theory of mind or mentalizing and the capacity to share the feelings of others referred to as empathy we summarize the major findings about the neural basis of mentalizing and empathizing and discuss some implications for economics

measuring the effect of risk attitude on marketing behavior despite extensive study researchers continue to search for consistent and reliable measures of risk preferences to explain market behavior we find that a measure combining experiments rooted in expected utility theory and measures derived from surveys explains spot and contractual sales but does not exhibit substantially greater explanatory power than its underlying components survey based measures are generally more significant indicators of marketing choices but experimental measures reveal how risk attitudes vary over a range of probable outcomes which is important in light of increased commodity price volatility given recently identified limitations on the applicability of expected utility theory we suggest that researchers include survey methods to obtain low cost supplemental measures

direct evidence on risk attitudes and migration geographic mobility is important for the functioning of labor markets because it brings labor resources to where they can be most efficiently used it has long been hypothesized that individuals migration propensities depend on their attitudes towards risk but the empirical evidence to the extent that it exists has been indirect in this paper we use newly available data from the german socio economic panel to measure directly the relationship between migration propensities and attitudes towards risk we find that individuals who are more willing to take risks are more likely to migrate between labor markets in germany this result is robust to stratifying by age sex education national origin and a variety of other demographic characteristics as well as to the level of aggregation used to define geographic mobility the effect is substantial relative to the unconditional migration propensity and compared to the conventional determinants of migration we also find that being more willing to take risks is more important for the extensive than for the intensive margin of migration

the economic valuation of biodiversity as an abstract good abstract the notion of an economic valuation of biodiversity raises major philosophical and practical challenges especially due to the fact that biodiversity is an abstract good insights from political philosophy and philosophy of language can help to clarify the reliability and scope of the current economic methods that can be used for the purpose of valuing it the analogy with another abstract good justice indeed shows that thinking about abstract goods is a very specific exercise if they do not take account of this specificity applications of hedonic and contingent valuation methods can hardly claim to be relevant to value biodiversity rawls theory of justice provides for the conceptual tools to overcome this problem a reinterpretation based on the theory of counterfactuals allows generalizing this account of justice to outline a theory of thinking about abstract goods this new framework emphasizes the importance of the institutional context in determining the reliability of thinking about abstract goods it points toward substantial reforms of the methodology of economic valuation specifically it suggests reinterpreting valuation as a dynamic expressive process where initial steps aim at reinforcing the reliability of later steps through an institutional transformation and stabilization of preferences for abstract goods

occupational sorting of school graduates the role of economic preferences we relate risk attitudes and patience of young graduates from high school college and university measured around the time that they start their labor market career in a large representative survey to the riskiness and timing of earnings in the occupations they choose to work in we find a systematic positive and significant relation between willingness to take risks and measures of occupational earnings risks and employment risk that we derive from a large administrative data set patient individuals are significantly more likely to choose for occupations with a steep earnings profile individuals whose economic preferences are not well aligned with the riskiness and timing of earnings in their initial occupation are more likely to change to an occupation that better matches their economic preferences

gender differences in competitiveness and risk taking comparing children in colombia and sweden we explore gender differences in preferences for competition and risk among children aged 912 in colombia and sweden two countries differing in gender equality according to macro indices we include four types of tasks that vary in gender stereotyping when looking at competitiveness running skipping rope math and word search we find that boys and girls are equally competitive in all tasks and all measures in colombia unlike the consistent results in colombia the results in sweden are mixed with some indication of girls being more competitive than boys in some tasks in terms of performance change whereas boys are more likely to choose to compete in general boys in both countries are more risk taking than girls with a smaller gender gap in sweden

using survey questions to measure preferences lessons from an experimental validation in kenya can a short survey instrument reliably measure a range of fundamental economic preferences across diverse settings we focus on survey questions that systematically predict behavior in incentivized experimental tasks among german university students becker et al 2016 and were implemented among representative samples across the globe falk et al 2018 this paper presents results of an experimental validation conducted among low income individuals in nairobi kenya we find that quantitative survey measures hypothetical versions of experimental tasks of time preference attitude to risk and altruism are good predictors of choices in incentivized experiments suggesting these measures are broadly experimentally valid at the same time we find that qualitative questions self assessments do not correlate with the experimental measures of preferences in the kenyan sample thus caution is needed before treating self assessments as proxies of preferences in new contexts

do women shy away from competition do men compete too much we examine whether men and women of the same ability differ in their selection into a competitive environment participants in a laboratory experiment solve a real task first under a noncompetitive piece rate and then a competitive tournament incentive scheme although there are no gender differences in performance men select the tournament twice as much as women when choosing their compensation scheme for the next performance while 73 percent of the men select the tournament only 35 percent of the women make this choice this gender gap in tournament entry is not explained by performance and factors such as risk and feedback aversion only playa negligible role instead the tournament entry gap is driven by men being more overconfident and by gender differences in preferences for performing in a competition the result is that women shy away from competition and men embrace it

exploring the diffusion of low energy houses an empirical study in the european union abstract diffusion of low energy houses is an important part of energy and climate policy in the european union eu and in individual eu countries key barriers to the adoption of low energy houses include additional construction costs and uncertainty surrounding actual energy and cost savings in this paper we econometrically analyze determinants of low energy house adoption including time and risk preferences we rely on original data from a large survey conducted among households in eight eu countries to our knowledge this is the first empirical study of low energy building adoption to rely on a demographically representative sample our set of covariates includes parameters of time and risk preferences that were elicited via state of the art incentivized multiple price list experiments and via self assessment scales we find mixed results for the effects of time discounting on low energy house adoption risk preferences do appear to matter as risk proneness increases so does the adoption of zero net or energy plus building but not passive houses consistent with the low cost hypothesis about environmental attitude and action we find no results for environmental attitudes and social norms

my reference point not yours abstract reference points formed by initial endowments influence individual decisions this experiment tests whether an individual can predict the behavior of other people who have different reference points despite financial incentives for being correct players fail to imagine themselves in another person s shoes a low endowment player generally cannot predict the behavior of those who were assigned high endowments and vice versa when asked about group behavior instead of considering the perspectives of others a low endowment player predicts that all others will act as if they all had low endowments this controlled experiment helps explain why it is difficult to understand the perspectives of other people while also demonstrating that it is possible when a player is specifically prompted to consider an individual in a different circumstance

the expected price of keeping up with the joneses abstract inflation expectations elicited in surveys have been found to exhibit large dispersion across individuals although several explanations have been proposed none fully explain this puzzle we explore in this paper a new behavioral factor social comparison using original survey data we find that respondents who feel they are falling behind compared to their peers report significantly and substantially higher inflation expectations we argue that this result is consistent with an experience based belief formation model in which those unable to keep up with the joneses overweight the high prices of aspiration goods they are unable to purchase

bubbles and financial professionals the efficiency of financial markets and their potential to produce bubbles are central topics in academic and professional debates yet little is known about the contribution of financial professionals to price efficiency we run 116 experimental markets with 412 professionals and 502 students we find that professional markets with bubble drivers capital inflows or high initial capital supply are susceptible to bubbles although they are more efficient than student markets in mixed markets with students bubbles also occur but professionals act as price stabilizers we show that heterogeneous price beliefs drive overpricing especially in bubble prone market environments

microfinance spillovers a model of competition in informal credit markets with an application to indian villages despite widespread interest in the development of microfinance spillover effects on the non using population and redistributive issues remain largely unexplored i study a competition game between microfinance institutions mfis offering joint liability loans and moneylenders offering individual loans in presence of adverse selection i show that one unintended consequence of the entry of a microfinance sector in local credit markets can be to trigger an increase in the equilibrium informal interest rate because mfis tend to attract a disproportionately safe share of the borrower pool away from incumbent moneylenders the existence of such composition externality depends crucially on the size of the microfinance sector and the risk composition of the borrower pool the model predicts a non linearly increasing relationship between informal interest rates and mfis capacity in relatively safe credit markets and no relationship in risky villages i show evidence supporting these predictions using a first hand panel database that records all credit transactions over 8 years for a sample of about 1000 households living in indian villages with extensive space and time variation in the size of their microfinance sector

gender stock market participation and financial literacy abstract women participate less than men in the stock market and score lower on financial literacy we explore the link between this gender gap in stock market participation and financial literacy using survey data on a random sample of 1300 individuals that is representative of the swedish population we show that the estimated gender gap in stock market participation diminishes when we control for basic financial literacy essentially a measure of numeracy a gender gap in risk taking remains significant also when controlling for financial literacy

u s and u k interest rates 1890 1934 new evidence on structural breaks this paper presents econometric evidence on whether the founding of the federal reserve in 1914 caused a structural change from level stationarity to difference stationarity in u s and u k short term nominal interest rates we develop new econometric tests that allow for parameter transitions to test for a break of this kind and undertake a grid search analysis of dates and speeds for the change we find that u s nominal interest rates most likely evolved rapidly to difference stationarity in june 1917 for the united kingdom we fail to reject the null that u k interest rate series follow a difference stationary process over the entire period 1890 1934 our analysis differs from previous research on this topic in that we take care to explore statistical uncertainty around parameter estimates and incorporate higher order dynamics into our econometric analysis

acting wife marriage market incentives and labor market investments do single women avoid career enhancing actions because these actions signal undesirable traits like ambition to the marriage market while married and unmarried female mba students perform similarly when their performance is unobserved by classmates on exams and problem sets unmarried women have lower participation grades in a field experiment single female students reported lower desired salaries and willingness to travel and work long hours on a real stakes placement questionnaire when they expected their classmates to see their preferences other groups responses were unaffected by peer observability a second experiment indicates the effects are driven by observability by single male peers

capturing the complexity of biodiversity a critical review of economic valuation studies of biological diversity biodiversity is a highly complex and abstract ecological concept even though it is not one physical entity it influences human well being in multiple ways mostly indirectly while considerable research effort has been spent on the economic valuation of biodiversity it remains to be a particularly challenging valuation object valuation practitioners therefore have to use proxies for biodiversity many of which are very simple single species habitats this paper presents a comprehensive and critical review of biodiversity valuation studies with special emphasis on biodiversity valuation in order to depict the state of the art in this research field it develops evaluation criteria so as to identify best practice applications and shows that the field of biodiversity valuation studies is rather heterogeneous regarding both valuation objects and valuation methods on the basis of our evaluation criteria and best practice studies we suggest that to account for the complexity and abstractness of biodiversity multi attribute approaches with encompassing information provision should be used that emphasise the roles biodiversity plays for human well being

assessing farmers risk preferences and their determinants in a marginal upland area of vietnam a comparison of multiple elicitation techniques we examine the consistency of risk preference measures based on eight hypothetical elicitation methods and a lottery game applied to smallholder farmers in a marginal upland environment in vietnam using these measures we identify influencing factors of risk aversion via regression analysis whereby unlike previous studies we include several proxies of social capital such as social networks and norms data were collected from household heads and spouses separately in a random sample of 300 households although correlations between most of the various risk preference measures are all statistically highly significant most are weak on average respondents have a high degree of risk aversion and specific characteristics gender age idiosyncratic shocks education social norms network reliance with extended family and connections to local authorities are significant determinants of risk preferences across most elicitation methods whereas others the household s dependency ratio wealth and covariate shocks are significant in a few methods only the explanatory power of the models is limited indicating that other factors are likely to be of greater importance in determining risk preferences the results can help target safety nets encourage investments and lead to the development of more applicable methods for assessing risk preferences of smallholders in developing countries

heterogeneity in expectations risk tolerance and household stock shares the attenuation puzzle this article jointly estimates the relationship between stock share and expectations and risk preferences the survey allows individual level quantitative estimates of risk tolerance and of the pe

social risk and the dimensionality of intentions previous research has documented a behavioral distinction between social risk or risk caused by human factors and natural risk in particular people tend to demand a premium on the probability of a favorable outcome in order to expose themselves to a social source of risk rather than a natural source of risk several explanations for what drives this social risk premium have been offered most prominently i an aversion to a counterparty s potentially malign intentions and ii a more general aversion to ceding control to someone with conflicting interests we propose that a fundamental determinant of the social risk premium may relate to a counterparty s capacity to engage in intentional action we employ a between subjects experimental design in which we manipulate subjects capacity for intentional action our design allows us to identify the component of the social risk premium related to an aversion to betrayal independent of any aversion to ceding control furthermore our results show that in

investing to cooperate theory and experiment we study theoretically and in a lab experiment investment decisions in environments where property rights are absent in our setting a player chooses an investment level before interacting repeatedly with a given set of agents the investment stochastically affects the payoffs of the game in every subsequent period we show that more volatile returns make investment more difficult in the absence of legal protection and might force the investor to invest more to guarantee cooperation experimental results are broadly consistent with the theoretical findings

life cycle saving insights from the perspective of bounded rationality this paper provides a new life cycle model that takes into account key elements of bounded rationality the paper shows that the model can account for patterns in the data that are hard to explain by the standard life cycle model among other patterns the model predicts that typically the young either hold no equity or their equity portfolio share is rather low and then increases over working life the analytical solution of the model demonstrates its high degree of tractability

risk aversion time preferences and out migration experimental evidence from ghana and indonesia abstract it has long been hypothesized that migrants and non migrants differ in their individual risk and time preferences due to a lack of reliable data on migrants preferences empirical evidence however is scarce therefore this paper has sought to advance research on preferences and migration decisions by using original household survey data from two developing countries that are both characterized by a longstanding tradition in regional migration in coastal communities in ghana and indonesia individual risk and time preferences have not only been elicited through survey questions but also through experimental tasks with real and relatively large monetary payoffs there is evidence that out migrants from both study regions are significantly less risk averse and have a lower time preference than non migrants overall the results indicate that the considered individual preferences are as important as employment status education or networks which have mainly been the focus of migration theories

rain emotions and voting for the status quo abstract do emotions affect the decision between change and the status quo we exploit exogenous variation in emotions caused by rain and analyze data on more than 870 000 municipal vote outcomes in switzerland to address this question the empirical tests are based on administrative ballot outcomes and individual postvote survey data we find that rain decreases the share of votes for political change our robustness checks suggest that this finding is not driven by changes in the composition of the electorate and changes in information acquisition in addition we provide evidence that rain might have altered the outcome of several high stake votes we discuss the psychological mechanism and document that rain reduces the willingness to take risks a pattern that is consistent with the observed reduction in the support for change

regime changes and interest rate risk this paper employs the bai and perron 1998 2003 structural break methodology to investigate important structural shifts in us interest rates using data from 1890 01 to 1933 12 i find evidence for two large structural shifts in my monthly sample the second shift is found to start in september 1917 this supports the view of several studies which argue that us entry into world war 1 and subsequent wartime policies rather than the founding of the federal reserve in 1914 caused a major change in the behavior of nominal interest rates

income and consumption a micro semistructural analysis with pervasive heterogeneity we develop a model of consumption and income that allows for pervasive heterogeneity in the parameters of both processes introducing codependence between household income parameters and preference

can redd still become a market ruptured dependencies and market logics for emission reductions in brazil abstract during almost 20 years of political debate on the nature of payments for ecosystem services pes these schemes have been characterized mostly as a non market approach even though attempts to transform them into market instruments has persistently recurred in these debates one notable example is the materialization of reducing emissions from deforestation and forest degradation redd in brazil where a sustainable development discourse dominates national forest governance at the expense of a carbon commodification discourse this research paper adopts a foucauldian approach to plot the epistemological foundations of the market logics that still influence redd institutionalization in brazil to a large extent and thereby reproduce what we define as a ruptured dependence on nature more specifically we recognize ruptured dependence in the three building blocks of market instruments namely singularization monetary valuation and appropriation our analysis shows that redd institutions have retained the singularization and monetary valuation of emission reductions even though the appropriation processes have rejected the possibility of exchange and instead emphasized the national ownership of emission reductions however appropriation remains a highly politicized process that is sensitive to criticism and open to calls for alternative approaches that are closer to ruptured dependence

incentives for dishonesty an experimental study with internal auditors we conduct an experiment with professional internal auditors and evaluate their performance and objectivity measured as the extent to which they truthfully report the performance of other participants in a real effort task in line with our hypotheses we find that incentive based compensation increases dishonest behavior competitive incentives lead to under reporting of other participants performance while collective incentives lead to over reporting of performance we replicate these results with a student sample in addition we find that moving from an environment with objective performance evaluation toward a peer evaluation scheme reduces performance among internal auditors but not among students jel c93 m42 m52

the start of interest rate smoothing in the us is it a monetary or fiscal story this article revisits the key issue raised by researchers who have empirically investigated the behaviour of short term us interest rates during the period 1890 1933 the seminal article of mankiw miron and weil 1987 argues that changes in the behaviour of nominal interest rates is best explained as a monetary regime shift that occurred with the founding of the federal reserve in 1914 this explanation is rejected by newbold lehybourne sollis and wohar 2001 who show that fiscal and regulatory changes driven by the needs of world war1 financing best explain the changing behaviour of interest rates that they identify as beginning in mid 1917 we find using three different statistical procedures that a structural break in the second moment of interest rates occurred in early 1915 this supports the monetary regime shift argument of mmw by illustrating that the interest rate smoothing policies of the fed can be observed as a variance break in short term interest rates

the gender effect in risky asset holdings abstract we study the relation between gender and stock holdings in finland a particularly gender equal country we show that it is crucial to control for risk aversion using a measure of subjective risk taking rather than measures derived from abstract gambles controls related to financial knowledge and resources also explain the gender difference the residual effect of the male gender on the conditional equity share after all appropriate controls is 3 percentage points and statistically significant the effect on stock market participation on the other hand is close to zero or negative so men contribute more to the nonparticipation puzzle conditional on covariates the gender difference mainly works through women s higher risk aversion which we find extends to finance professionals and wealthy private banking customers

risk aversion wealth and background risk we use household survey data to construct a direct measure of absolute risk aversion based on the maximum price a consumer is willing to pay for a risky security we relate this measure to consumer s endowments and attributes and to measures of background risk and liquidity constraints we find that risk aversion is a decreasing function of the endowment thus rejecting cara preferences we estimate the elasticity of risk aversion to consumption at about 0 7 below the unitary value predicted by crra utility we also find that households attributes are of little help in predicting their degree of risk aversion which is characterized by massive unexplained heterogeneity we show that the consumer s environment affects risk aversion individuals who are more likely to face income uncertainty or to become liquidity constrained exhibit a higher degree of absolute risk aversion consistent with recent theories of attitudes toward risk in the presence of uninsurable risks jel d1 d8

an empirical analysis of earnings and employment risk the mean and higher moments of the distribution of future income are crucial determinants of individual choices these moments are usually estimated in panel data from past income realizations inthis article we rely instead on subjective expectations available in the 1995 survey of household income and wealth a large random sample representative of italian households the survey elicits information on the distribution of future earnings and on the probability of unemployment analysis of this distribution helps us understand how individual uncertainty evolves over the life cycle and if attitudes toward risk affect occupational choices and income riskiness

are risk preferences stable across contexts evidence from insurance data using a unique dataset we test whether households deductible choices in auto and home insurance reflect stable risk preferences our test relies on a structural model that assumes households are objective expected utility maximizers and claims are generated by household coverage specific poisson processes we find that the hypothesis of stable risk preferences is rejected by the data our analysis suggests that many households exhibit greater risk aversion in their home deductible choices than their auto deductible choices our results are robust to several alternative modeling assumptions jel d11 d83

monetary valuation of natural predators for biological pest control in pear production abstract in spite of global actions biodiversity is declining at an alarming rate despite the need for objectively comparable monetary standards to include biodiversity arguments in policymaking research on the relationship between species diversity and its valuation from a societal perspective is still scarce in this paper a methodological framework for the valuation of natural predators based on their ecological role in the agroecosystem is introduced the framework integrates a dynamic ecological model simulating interactions between species with an economic model thereby quantifying the effect of reduced numbers of natural predators on the net farm income the model attributes an objective monetary value to increased species diversity through the changes in the provisioning of a marketable good results indicate that the loss of three predators could decrease net farm income with 88 86 ha 1 to 2186 5 ha 1 for the pear production sector in flanders in 2011 this constitutes to an indirect use value of 0 68 million for one predator and 16 63 million for the presence of three predators the aim is to provide a justification for the argument for biodiversity conservation based on the ecological function of species through the delivery of comparable monetary standards

wage gains associated with height as a form of health human capital height is consulted as a latent indicator of early nutrition and lifetime health status height is observed to increase in recent decades in populations where per capita national income has increased and public health activities have grown height is determined by genetic make up and realized in part through satisfactory nutrition and health related care and conditions alternative instrumental variables iv are explored which proxy price and income constraints which are expected to influence the latter reproducible human capital investments in height i report ols and iv estimates of the partial effect of height on log hourly wages in recent national surveys from three countries ghana brazil and the united states i conclude that the human capital productivity effect of height estimated by parent education ivs in the us and ghana are many times larger than the ols estimates and in ghana and brazil the regional price ivs estimates also imply a substantially larger human capital wage effects of height compared with the ols estimates the ols estimates of height effects on wages are dominated by the genetic variation in height and appear to understate substantially the human capital returns to health and nutrition inputs which increase adult height this abstract was borrowed from another version of this item

balance of power and the propensity of conflict we study the role of an imbalance in fighting strengths when players bargain in the shadow of conflict our experimental results suggest in a simple bargaining game with an exogenous mediation proposal the likelihood of conflict is independent of the balance of power if bargaining involves endogenous demand choices however the likelihood of conflict is higher if power is more imbalanced even though endogenous bargaining outcomes reflect the players unequal fighting strengths strategic uncertainty causes outcomes to be most efficient when power is balanced in turn the importance of exogenous mediation proposals depends on the balance of power

the complexity of biodiversity a biological perspective on economic valuation abstract to value something you first have to know what it is bartkowski et al 2015 reveal a critical weakness that biodiversity has rarely if ever been defined in economic valuations of putative biodiversity here we argue that a precise definition is available and could help focus valuation studies but that in using this scientific definition a three dimensional measure of total difference valuation by stated preference methods becomes at best very difficult we reclassify the valuation studies reviewed by bartkowski et al 2015 to better reflect the biological definition of biodiversity and its potential indirect use value as the support for provisioning and regulating services our analysis shows that almost all of the studies reviewed by bartkowski et al 2015 were not about biodiversity but rather were about the vague notion of naturalness or sometimes a specific biological component of diversity alternative economic methods should be found to value biodiversity as it is defined in natural science we suggest options based on a production function analogy or cost based methods particularly the first of these provides a strong link between economic theory and ecological research and is empirically practical since applied science emphasizes a scientific definition of biodiversity in the design and justification of conservation plans the need for economic valuation of this quantitative meaning of biodiversity is considerable and as yet unfulfilled

developments in non expected utility theory the hunt for a descriptive theory of choice under risk this article reviews recent developments in the economic theory of individual decision making under risk since the 1950s it has been known that individual choices violate the standard model of expected utility in predictable ways considerable research effort has now been devoted to the project of developing a superior descriptive model following an overview of non expected utility theories which distinguishes between conventional and non conventional approaches the paper seeks to assess these alternative models in terms of empirical success using laboratory and field data and theoretical usefulness the closing sections reflect on some new directions emerging in this literature

sequencing and the adding up property in contingent valuation of endangered species are contingent non use values economic values this paper presents tests of the theoretical validity of the contingent valuation cv method the validity of cv is especially a concern when involving environmental goods with a predominant non use value one test of theoretical validity is the adding up property that implies that a specific good should be equally valued irrespectively of it is being valued directly or built up sequentially in this cv study four independent sub samples stated willingness to pay for the same composite good or package using different sequences one sub sample valued the composite good directly while two sub samples faced built up sequences valuing first subsets of this composite good a fourth sub sample valued the composite good from a dividing out approach facing first the valuation of a larger multi package theoretically expected sequencing effects were observed the subset goods obtained higher values earlier in a sequence and the dividing out approach decreased the stated value for the composite good most importantly these cv data did pass the tests of the adding up property

tempus fugit time pressure in risky decisions we study the effects of time pressure on risky decisions for pure gain prospects pure loss prospects and mixed prospects involving both gains and losses in two experiments we find that time pressure has no effect on risk attitudes for gains but increases risk aversion for losses for mixed prospects subjects become simultaneously more loss averse and more gain seeking under time pressure depending on the framing of the prospects the results suggest the importance of aspiration levels and thus the overall probability to break even under time pressure we discuss the implications of our findings for decision making situations that involve time pressure

coase lecture the glass ceiling despite decades of progress women remain underrepresented in the upper part of the earnings distribution we review the recent research trying to explain this phenomenon after briefly revisiting gender differences in education we turn our attention to a body of work that has argued that gender differences in psychological attributes are holding back women s earnings we then review another active area of research focused on the challenges that women may face when trying to juggle competing demands on their time in the workplace and the home particularly when the home includes children we discuss recent work documenting women s greater demand for flexibility in the workplace as well as work measuring the labour market penalties associated with such demand for flexibility particularly in the higher paying occupations in the economy we highlight possible countervailing forces both at work and at home that may explain why these work family considerations may remain highly relevant to today s glass ceiling despite reduced time spent in non market work and a trend towards a more equal division of non market work between men and women finally we discuss the role that public policy and human resource practices may play in adding more cracks to the glass ceiling

performance responses to competition across skill levels in rank order tournaments field evidence and implications for tournament design tournaments are widely used in the economy to organize production and innovation we study individual data on 2775 contestants in 755 software algorithm development contests with random assignment the performance response to added contestants varies nonmonotonically across contestants of different abilities precisely conforming to theoretical predictions most participants respond negatively whereas the highest skilled contestants respond positively in counterfactual simulations we interpret a number of tournament design policies number of competitors prize allocation and structure number of divisions open entry and assess their effectiveness in shaping optimal tournament outcomes for a designer

an analysis of inflation and interest rates new panel unit root results in the presence of structural breaks abstract this paper investigates the order of integration of inflation and interest rates in a panel of 19 countries the results show that once multiple endogenous breaks are allowed for and appropriate critical values are used the series appear to be i 0

the effect of adolescent experience on labor market outcomes the case of height taller workers receive a wage premium net of differences in family background the disparity is similar in magnitude to the race and gender gaps we exploit variation in an individual s height over time to explore how height affects wages controlling for teen height essentially eliminates the effect of adult height on wages for white men the teen height premium is not explained by differences in resources or endowments the teen height premium is partially mediated through participation in high school sports and clubs we estimate the monetary benefits of a medical treatment for children that increases height

taking the initiative what characterizes leaders abstract taking the initiative is a crucial element of leadership and an important asset for many jobs we assess this element of leadership in a game in which it emerges spontaneously since people have a non obvious possibility to take the initiative we can show that leadership in this game correlates with real life activities associated with taking the initiative combining this game with other experimental games and with questionnaires we investigate the personality characteristics that entail leadership we find efficiency concerns and generosity to be important determinants of leadership leaders have an internal locus of control and are more patient than non leaders but they are not different from the non leaders with respect to risk attitude response time patterns and the results from the cognitive reflection test show that cognitive resources are relevant in the decision to lead

financial decision making are women really more risk averse 40 males 33 females gain gambling gain domain loss gambling loss domain a contextual frames b abstract gambling frames studies the application of experimental methods provided stronger control of the economic environment in which decisions were made we elicited data which call into question the prevalence of stereotypic risk attitudes in financial decision making first we find that the comparative risk propensity of male and female subjects is strongly dependent on the financial decision setting second and more important we observe no gender differences in risk propensity when subjects face contextual decisions since in practice financial decisions are always contextual our results suggest that the above gender stereotype may not reflect true male and female attitudes toward financial risks i gender specific risk behavior an experimental design our experiment was designed to examine gender specific risk propensity in decisions relevant for investors and managers table 1 gives an overview of the experimental design in the main treatment we implemented risky choices in the form of investment and insurance decisions choice behavior in this treatment henceforth called the context treatment directly measures the risk behavior of male and female subjects in contextual financial decisions we also ran a control treatment in which the same risky choices were presented as abstract gambling decisions this control treatment henceforth called the abstract treatment allows us to validate the risk behavior induced by our experimental procedure in the light of the above mentioned gambling evidence in the context treatment subjects were confronted with risky choices in two different decision contexts subjects first had to complete a series of investment decisions they were then presented with a series of identical choices this time however framed as insur1 wealth effects from income differences outside the laboratory may still affect risk behavior in our experiment they are controlled for in our model 2 experimental instructions are available in german from the authors or in english from our web page www wif ethz ch publikationen htm ance decisions each investment and insurance decision incorporated a choice between a risky lottery and a certain payoff with the series of choices implemented in the two frames we elicited our subjects certainty equivalents for the same four risky lotteries l1 l2 l3 l4 in both contexts we implemented two frames in the context treatment in order to measure the risk propensity of subjects toward both perceived gains and perceived losses in both frames all possible payoffs for each decision were positive in the investment frame these payoffs were also presented as gains while in the insurance frame the same payoffs were presented as losses relative to an initial endowment therefore elicited certainty equivalents in the investment frame measure subjects risk propensities in the gain domain while certainty equivalents in the insurance frame measure risk propensity in the loss domain if in contextual financial decisions female subjects are generally more risk averse than men our results should display ceteris paribus lower female certainty equivalents in both the investment and insurance frames 3 the four lotteries l1 l2 l3 and l4 each had two possible outcomes payoffs in swiss francs 1 sfr a 0 60 and their probabilities were 30 sfr 6 10 sfr 6 30 sfr 2 10 sfr 2 30 sfr 6 10 sfr 6 and 50 sfr 2 20 sfr 2 respectively 4 experimental evidence suggests that individual risk propensity will vary systematically between the gain and loss domain daniel kahneman and amos tversky 1979 383 vol 89 no 2 gender and economic transactions 3y16 my68 mp 383 friday dec 10 08 20 am lp aer my68 figure 1 differences in mean certainty equivalents ce between male and female subjects by frame note certainty equivalents and male female differences are measured in swiss francs in the abstract treatment we confronted a different group of subjects with exactly the same risky decisions as those in the main treatment however as mentioned before all choices in this control treatment were framed as abstract gambling decisions again two frames were implemented in the gaingambling and loss gambling frames we measured the risk attitudes of subjects toward gambles in the gain and loss domain respectively subjects in both treatments were told in advance that one of their choices would determine their experimental earnings further all subjects completed a post experimental questionnaire which yielded information on each subject s disposable income this information is necessary to exclude wealth effects due to income differences outside the laboratory as an explanation of gender specific choice behavior

the impact of financial crises and tolerance for uncertainty abstract financial crises can have severe negative effects on investment one reason for this is that financial crises increase uncertainty increasing the real option value of delaying investment in this paper we show that the negative effect of crises on investment differs significantly across countries in countries with low tolerance for uncertainty the negative effect is strong the negative effect is absent in countries that are more tolerant of uncertainty these findings are similar across different types of financial crisis they vary as predicted across type of investor asset and industry and they are not driven by uncertainty averse countries adopting more rigid institutions

consistency and heterogeneity of individual behavior under uncertainty by using graphical representations of simple portfolio choice problems we generate a very rich dataset to study behavior under uncertainty at the level of the individual subject we test the data for consistency with the maximization hypothesis and we estimate preferences using a two parameter utility function based on faruk gul 1991 this specification provides a good interpretation of the data at the individual level and can account for the highly heterogeneous behaviors observed in the laboratory the parameter estimates jointly describe attitudes toward risk and allow us to characterize the distribution of risk preferences in the population

do we really care about biodiversity this paper addresses from an economic perspective the issue of global biodiversity conservation it challenges the perception that the world really cares a great deal about biodiversity and is prepared to pay the full cost of maintaining this stock of natural capital despite the existence of a plethora of international agreements there still seems to be a global deficit of care surrounding efforts to combat challenges such as those posed by global warming and biodiversity conservation more light can be thrown on the degree of care by measuring both the actual expenditures and the stated willingness to pay for biodiversity conservation however actual expenditures are much lower than willingness to pay estimates recorded in the published literature using the criteria that the right amount of conservation effort is one where the marginal economic benefits from conservation just equal the marginal costs of conservation the paper explores the biodiversity conservation conundrum and concluded that on the available evidence the world does not care too much about this natural capital stock and bequests to future generations

time varying risk aversion abstract exploiting portfolio data and repeated surveys of an italian bank s clients we test whether investors risk aversion increases following the 2008 crisis we find that after the crisis both qualitative and quantitative measures of risk aversion increase substantially and that affected individuals divest more stock we investigate four explanations changes in wealth expected income perceived probabilities and emotion based changes of the utility function our data are inconsistent with the first two channels while they suggest that fear is a potential mechanism underlying financial decisions whether by increasing the curvature of the utility function or the salience of negative outcomes

direct evidence of risk aversion as a source of advantageous selection in health insurance abstract using the self stated degree of risk aversion regarding health from the gsoep we find some evidence for risk aversion being a source of advantageous selection risk averse men more often procure supplementary insurance for hospital visits despite needing the additional coverage less

reference points and effort provision a key open question for theories of reference dependent preferences is what determines the reference point one candidate is expectations what people expect could affect how they feel about what actually occurs in a real effort experiment we manipulate the rational expectations of subjects and check whether this manipulation influences their effort provision we find that effort provision is significantly different between treatments in the way predicted by models of expectation based reference dependent preferences if expectations are high subjects work longer and earn more money than if expectations are low

temporal stability of risk attitudes and the impact of adverse shocks a panel data analysis from thailand and vietnam summary exogenous negative shocks and intrinsic risk attitudes are two important elements characterizing the vicious cycle of poverty associated with rural households in developing countries recent empirical studies suggest that adverse shocks a key driver of poverty can trigger substantial changes in the risk attitudes of poor people leading to decisions that perpetuate their lives in poverty although the temporal variability of risk attitudes is a controversial topic the literature advocating the temporal variability of risk attitudes suggests that covariate shocks such as natural disasters alter risk attitudes over time whereas idiosyncratic shocks show no such significant impact this paper aims to test the temporal stability of risk attitudes in rural households in thailand and vietnam to determine whether this pattern covariate shocks that affect risk attitudes and idiosyncratic shocks that do not can be confirmed for these households i use an exogenous measure of shocks to explain temporal variation in risk attitudes thus i estimate variation in consumption using a multilevel model in which variation in consumption at the individual level serves as a proxy for idiosyncratic shocks while variation in consumption at the aggregate level is used to measure covariate shocks my study finds temporal variability in risk attitudes that is driven by covariate shocks in vietnam and in contrast to past research by idiosyncratic shocks in thailand the results suggest that vietnamese respondents may be better in insuring idiosyncratic risks for example through safety nets while mutual insurance across individuals does not seem to work well in thailand in addition results indicate that the mutual insurance problem in thailand seems to increase in wealth the differences that i find between thailand and vietnam and across poverty types correspond to the difference in political systems and consequently the focus of socio political measures thailand s recent political volatility and the growing lack of social cohesion in thai society support these findings

do people anticipate loss aversion there is growing interest in the use of loss contracts that offer performance incentives as up front payments that employees can lose standard behavioral models predict a trade off in the use of loss contracts employees will work harder under loss contracts than under gain contracts but anticipating loss aversion they will prefer gain contracts to loss contracts in a series of experiments we test these predictions by measuring performance and preferences for payoff equivalent gain and loss contracts we find that people indeed work harder under loss than gain contracts as the theory predicts surprisingly rather than a preference for the gain contract we find that people actually prefer loss contracts in exploring mechanisms for our results we find suggestive evidence that people do anticipate loss aversion but select into loss contracts as a commitment device to improve performance using one bias loss aversion to address another dynamic inconsistency data as supplemental material are a