Determinants and Consequences of Non-Standard Preferences

This dissertation studies the determinants and consequences of standard, and in particular, non-standard economic preferences. Preferences are the primitives of choice theories in economics. An active body of research investigates the heterogeneity and determinants of economic preferences and their consequences for decision-making. In three chapters, this dissertation studies different aspects of this topic both theoretically and empirically. Chapter 1 Preferences over Relative Income within the Household investigates the existence of non-standard, immaterial preferences over relative income within the household. In intuitive terms, preferences over relative income capture the notion that individual partners have a preference over their share of total household income independently of the level of total household income. For instance, such preferences include inequality aversion or a preference for being the primary earner. The chapter documents the existence of preferences over relative income, quantifies their extent and documents heterogeneity by gender. The chapter also investigates the consequences of these preferences for household decision making and socio-economic gender inequality. Chapter 2 Relationship of Gender Differences in Preferences to Economic Development and Gender Equality empirically investigates cross-cultural variation of gender differences in several standard and non-standard economic preferences. The chapter investigates the role of economic development and gender equality in shaping gender differences in preferences across countries. Chapter 3 Longevity and Patience investigates the role of longevity in driving patience across countries and individuals. The chapter documents empirical evidence for the long-standing hypothesis that higher longevity fosters patience. In addition, the chapter explores theoretically the consequences of a positive link between longevity and patience for the emergence of development traps./nThe first chapter Preferences over Relative Income within the Household tests for the existence and quantitative extent of non-standard, immaterial preferences over relative income within the household and analyzes their consequences for the matching of couples and family outcomes. This chapter presents a theoretical model and empirical evidence from administrative German tax data and furthermore documents results from an online experiment. The model and evidence from tax data have been developed in joint work with Nikolaus Hildebrand. First, to guide the empirical analysis, the chapter outlines a marriage market matching model in which prospective partners can hold non-standard preferences over relative income, such as inequality aversion or a preference or aversion for being the primary earner. The model yields testable predictions for the presence and structural form of partners' preferences over relative income either as a kink or notch at the point of equality in the relative income distribution of households, i.e. the distribution of the female share in total household income. The predictions are tested for the case of Germany using administrative tax data. The data indicates a kink at the 50%-threshold in the relative income distribution which indicates the presence of kinked preferences over relative income. To disentangle the preferences of women and men, a survey experiment is conducted and analyzed. The results indicate that women exhibit inequality aversion while men show a preference for being the primary earner. Finally, the chapter explores the consequences of non-standard preferences over relative income on further family outcomes such as divorce and household public good provision./nThe second chapter Relationship of Gender Differences in Preferences to Economic Development and Gender Equality investigates the role of economic development and gender equality in driving gender differences in standard and non-standard economic preferences. The chapter includes material from a study joint with Armin Falk and published in Science. The chapter first lays out two contrasting hypotheses that make opposing predictions about the relationship of gender differences in preferences to economic development and gender equality. According to the Social Role Hypothesis, higher economic development and gender equality promote a dissolution of traditional gender roles, leading to a narrowing of gender differences in preferences. In contrast, according to the Resource Hypothesis, higher economic development and gender equality yields greater availability of material and social resources to both women and men and facilitates the independent development and expression of gender-specific preferences, ultimately leading to an expansion of gender differences. These hypotheses are tested using 76 representative country samples of validated measures of six preferences, including willingness to take risks, patience, positive reciprocity, negative reciprocity, altruism, and trust. The analysis shows that gender differences in preferences are positively associated with both economic development and gender equality, confirming the predictions of the Resource Hypothesis. The findings point toward the critical role of availability of and equal access to material and social resources for both women and men in facilitating the independent formation and expression of gender-specific preferences across countries./nThe third chapter Longevity and Patience provides an empirical test of the long-standing and influential hypothesis stating that greater longevity fosters higher patience.The chapter includes material that has been developed in joint work with Armin Falk and Uwe Sunde. The chapter tests this hypothesis using data on an experimentally validated survey measure of patience in 76 representative country samples in conjunction with life table measures of longevity that vary across country-age-gender cells. The empirical framework analyzes the longevity-patience link in an econometric design that is akin to a difference-in-difference specification isolating the effect of longevity from age-, country-, and gender-specific confounders. The empirical results document that higher longevity is associated with higher patience: a ten-year increase in life expectancy is associated with a 5-percentage point increase in the discount factor. This relationship remains robust for different proxies of life expectancy, for various sub-samples, when applying instrumental variable estimations, and when conditioning on lifetime experiences related to economic development, institutional quality, or violence. Finally, the chapter analyzes the longevity-patience link in a theoretical framework that demonstrates the consequences for the emergence of development traps due to a vicious cycle of high mortality, low patience, and low human capital investments.

Advisor: DellaVigna, Stefano