NEW EVIDENCE ON CREDIT CARD BORROWING AND REPAYMENT PATTERNS

A new dataset allows researchers to examine patterns of credit card use for both borrowing and payoff. This article addresses changes in these behaviors for different birth cohorts by estimating cohort‐adjusted age profiles for debt and payoff rates based on a time series of cross sections. Younger consumers are found to be borrowing more heavily and repaying at lower rates than older generations. The accumulation of credit card debt is found to continue over the lifecycle. This has implications for recent changes in laws governing the credit card industry. Increases in minimum required payment rates are examined and are found to increase actual payoff rates more than proportionately. (JEL D12)     

AN EXPERIMENTAL TEST ON RETIREMENT DECISIONS

As part of the current debate on the reform of pension systems, this paper presents an original experimental test where subjects face three different payoff sequences with identical expected value. Two central questions are analyzed. First, whether the distribution of retirement benefits across time influences the retirement decision. And second, whether actuarially fair pension systems distort the retirement decision. The results indicate both that a lump-sum payment rather than annuity benefits is far more effective in delaying the retirement decision and that recent reforms that encourage the link between lifetime contributions and pension benefits to delay the retirement decision should take into account timing considerations. ( JEL C91, H55, J26)     

The Application of Artificial Neural Networks for Outcome Prediction in a Cohort of Severely Mentally Ill Outpatients

SUMMARY

Social workers and other mental health workers lack clinical decision support tools to predict which clients are at greatest risk of psychiatric rehospitalization. Artificial neural networks (ANNs), are computer decision support tools that make prediction and classification decisions based on accumulated experience and information contained in successfully solved cases (correct decisions). This study evaluates the use of ANNs in predicting rehospitalization of severely mentally ill outpatients. Eight Bayesian ANN models achieved correct prediction rates ranging from 75% to 93% for two prediction conditions. These results support the utility of Bayesian ANN models in the development of clinical decision support tools.     

PAYOFF DOMINANCE VS. COGNITIVE TRANSPARENCY IN DECISION MAKING

This paper reports on three laboratory experiments designed to investigate the roles of decision costs and rewards on the accuracy of economic decisions. The experimental vehicle is a purchase decision employing the Becker-DeGroot-Marshak (BDM) mechanism. The first experiment verifies the incentive-compatibility of the BDM in a pure induced-value setting; the second tests its performance under different information regimes and payoff schedules; the third addresses the role of feedback information. Steep payoff schedules are found to be necessary to optimizing behavior only in cases where subjects must search out an optimal strategy rather than being able to deduce it from information provided. (JEL C91, D83)     

ON THE NATURE OF RECIPROCAL MOTIVES

Data from 692 subjects in 11 experimental treatments provide a systematic exploration of the existence and nature of reciprocal behavior in two-person games. The experimental design discriminates between motivations of reciprocity and (nonreciprocal) other-regarding preferences. The existence of positive reciprocity is found to be dependent on the level of social distance but not the level of monetary payoff. The larger context in which a decision is made is found to have a significant effect on negative reciprocity. These findings on payoff levels, social distance, decision context, and reciprocity have implications for both theoretical modeling and experimental design. (JEL C70 , C91 , D63 , D64 )     

GAME THEORY FOR PLAYING GAMES: SOPHISTICATION IN A NEGATIVE-EXTERNALITY EXPERIMENT

We explore the extent to which the lack of Nash payoff maximization in experimental games is attributable to the "sophistication" of participants (i.e., their understanding of strategic decision making and profit-maximizing decisions). To this end, we compare the behaviors of sophisticated participants (i.e., those who have been exposed to the concepts of game theory) against those of a more standard subject pool in a moral hazard environment. Results suggest that sophisticated subjects are significantly more likely to adopt strategies predicted by standard theory and arrive at a Nash equilibrium. ( JEL C72, C91, C92, D63, D64)     

RATE BASE METHODS AND REALIZED RATES OF RETURN

Considerable regulatory energy and academic research has been devoted to examining the question of what constitutes the "correct" basis of valuation of the rate base for utility firms. This study compares utility earnings using data which adjust for differences among state jurisdictions concerning what is allowed in the rate base. The results show that there is no statistical difference in earnings of firms regulated by original cost, fair value, and reproduction cost jurisdictions. The results also show that regulation cannot generally explain the variance in earnings between states and rapid inflation does not seem to affect the results.     

The choice of migration destination: Dominican and Cuban immigrants to the mainland United States and Puerto Rico

"Puerto Rico provides an alternative destination for immigrants from the Spanish-speaking Caribbean because the culture is similar to that in the source country. In this study, we use the 1980 [U.S.] Census of Population to examine the importance of relative earnings and culture in the choice of destination. The main finding is the similar pattern of choice of location for immigrants from the Dominican Republic and Cuba. The more educated and more professional immigrants are found in either Puerto Rico or outside the enclave on the [U.S.] mainland. Within this group, those with less time remaining in the labor market and lower English ability are found in Puerto Rico. We find that not all differences in location decision are attributable to differences in reward structure by location."     

COURT STRUCTURE, DEFENSE ATTORNEY USE, AND JUVENILE COURT DECISIONS

A typology of metropolitan juvenile courts suggests important variations in court structure and procedure. Data describing case characteristics and disposition decisions were drawn from two courts selected to represent "types" ("traditional" and "due process") that are different in structure and procedure. Analyses reveal important differences in the uses of defense attorneys, in case outcomes, and in the variables that influence case decisions. Defense attorney use is more consequential and case decision making is more patterned and regular in the "due process" type court. The study suggests an explanation for contradictions of previous research on the determinants of juvenile court decisions and an interpretation for confusing findings on the consequences of using defense attorneys in juvenile court proceedings.     

Conditionality of adaptiveness: Investigating the relationship between numeracy and adaptive behavior

Recent studies have illustrated that individuals with higher numeracy are more likely to make adaptive choices than individuals with lower numeracy. Highly numerate individuals can consistently make normatively superior choices by maximizing expected value (EV) in meaningful choice problems (high-payoff condition). However, in trivial problems (low-payoff condition), they can also adaptively change their strategy to make good enough choices and not follow a normatively superior strategy. Upon inspection of choice problems used in earlier studies, it was revealed that payoff was not the only varying factor between the two payoff conditions. Therefore, it is unclear whether payoff conditions alone can provide sufficient context for adaptive modulation in decision strategy. In two pre-registered studies (N = 343), we tested numerate individuals’ adaptiveness under high- and low-payoff conditions addressing the limitations of earlier studies. Results revealed that the presence of two payoff conditions together did not initiate adaptive strategy selection, regardless of participants’ numeracy. Instead, numerate individuals, compared to less numerate individuals, consistently made more EV-consistent choices in both payoff conditions. We identified that the change in EV consistency across payoff conditions was influenced more by the absolute difference than the relative difference in the expected reward.     

RISK TAKING FOR ONESELF AND OTHERS: A STRUCTURAL MODEL APPROACH

Economic theory makes no predictions about social factors affecting decisions under risk. We examine situations in which a decision maker decides for herself and another person under conditions of payoff equality, and compare them to individual decisions. By estimating a structural model, we find that responsibility leaves utility curvature unaffected, but accentuates the subjective distortion of very small and very large probabilities for both gains and losses. We also find that responsibility reduces loss aversion, but that these results only obtain under some specific definitions of the latter. These results serve to generalize and reconcile some of the still largely contradictory findings in the literature. They also have implications for financial agency, which we discuss.     

Competitive lobbying for a legislator's vote

This paper develops a model of interest group lobbying based on the central premise that such lobbying is fundamentally an exercise in strategic information transmission. Lobbyists typically possess information that legislators do not and, inter alia, such information is relevant to legislators when it concerns the consequences — either policy or political — of supporting one bill rather than another. However, given that the interests of lobbyists do not necessarily coincide with those of legislators, the extent to which a lobbyist is able to persuade a legislator to act in his or her interest is moot. The paper explores the extent to which lobbyists can influence a legislative decision in such a setting; in particular, we are concerned with the incentives for interest groups to acquire costly information and lobby a legislator when there exist other groups that do not share the same interests. Among the results are that a legislator will on average make better decisions with lobbying than without, and that the more important is an issue to a special interest group, the more likely is the legislator to make the correct full-information decision.Herb and Gloria Weiss are indirectly responsible for this paper. Unfortunately, neither they nor the anonymous referees can be held responsible for any errors or omissions the paper might contain.     

Tracing risky decisions for oneself and others: The role of intuition and deliberation

This study contributes to the understanding of how individuals make choices for themselves and on behalf of others in a risky environment. In a laboratory eye-tracking experiment, we investigate whether risk preferences, decision error, and information processing differ between decisions made for oneself and on behalf of others. While we find no differences in risk preferences when deciding for oneself or for someone else, individuals have a greater decision error when deciding for others. Process data partly explains these differences. Individuals spend less time, have less fixations, and inspect less information when deciding for others. We detect similar processing patterns when comparing intuitive and deliberative decision making. We argue that the processing of decisions for oneself is more effortful and involves more extensive deliberation which, in turn, is related to less decision errors.     

The Effects of Educational-Occupational Mismatch on Immigrant Earnings in Australia,with International Comparisons1

This paper examines the way immigrant earnings are determined in Australia. It uses the overeducation/required education/undereducation framework and a decomposition of the native-born/foreign-born differential in the payoff to schooling. This decomposition links overeducation to the less-than-perfect international transferability of immigrants’ human capital, and undereducation to favorable selection in immigration. Comparisons are offered with findings from analyses for the U.S. and Canada to enable assessment of the relative impacts of favorable selection and the limited international transferability of human capital to the lower payoff to schooling for the foreign born. The sensitivity of the results of the decomposition to several measurement issues is assessed.     

On “lab rats”

Experimental subjects usually self-select to the laboratory and this may introduce a bias to the conclusions derived from observing their behavior. We analyze data stored by a subject-pool management program at an experimental laboratory and speculate about the effect of individual decisions on returning. Specifically, we test whether experience and earnings in previous sessions together with demographic variables explain the decision to return to the laboratory. We find that males and (in monetary terms) well-performing subjects are more likely to participate in experiments again.     

Comparing a risky choice in the field and across lab procedures

Controlled laboratory experiments have become a generally accepted method for studying economic behavior, but there are two issues regarding the reliability of such work. The first pertains to the ability to generalize experimental results outside the laboratory. The second pertains to the impact the payment procedure has on observed behavior. This paper adds empirical insight into both issues. Using data from the promotional campaign of a bank and a laboratory experiment that closely mimics the same decision, we find similar levels of risk taking controlling for gender and age. We also compare behavior on this same risky choice across three distinct experimental payoff procedures: a single salient choice as in the field, multiple responses for similar choices with one selected at random for payment, and a single salient choice that has only a small probability of being implemented. We find nearly identical behavior across these three payment procedures.     

Farm Wives' Labor Force Participation and Earnings

Abstract The decisions of farm wives to work off the farm and the earnings they make in that off-farm employment should be considered simultaneously. Previous studies of wives' off-farm earnings have included only employed wives in their analyses of the factors affecting earnings, which results in biased estimates. This study tests, via Tobit analysis, a model which includes all farm wives and examines the effects of wives' human capital, farm and family constraints, and labor market characteristics on both their off-farm employment decisions and their earnings. Wives' off-farm earnings are found to be related to wives' education, labor market experience, presence of children, other family income, farm size, and debt/income ratio. Changes in these factors have a greater influence on the labor market participation decisions of farm wives than on the variation in their earnings, once employed.     

Labor force participation and fertility: a social analysis of their antecedents and simultaneity.

The nature of the relationship between labor force participation and fertility is examined for 172 families residing in the Chicago metropolitan area. The sample represents a marriage cohort. The data was collected during the 6th year of marriage (1978). The average age of the wife was 27, that of the husband 29. About 15% of the sample was black, the rest white. The median years of schooling completed was 13 for the wife and 14 for the husband. Median family income (less wife's earnings) was US$15,000; approximately 96% of the husbands and 53% of the wives were employed. The hypothesis is that family decisions are socially constructed through husband and wife interactions wherein individual needs and desires of the spouses are resolved by means of give-and-take and mutual influence. Economic factors, societal forces, group pressures and physiological concerns are presumed to work through the psychological characteristics of the spouses and the social interactions transpiring between them. The is, the exogenous determinants are assumed to constitute the setting or context for individual and social decision making. They either enter as inputs to joint decision making or else shape the needs, desires, or other psychological reactions of spouse prior to decision making. In this study, the specific phenomena to be explained are wife's labor force participation and family size. Also tested is the effect of psychological investment in these 2 issues and the impact of the role relationship between the spouses. The hypotheses are scrutinized at 2 levels of analysis: the individual spouses and the husband-wife dyad. Comparisons are made among social psychological models, wherein either the husband of wife provides information as they perceive their relationship and a sociological model wherein group constructs are formed with the husband and wife acting as informants on the pattern of norms guiding their relation. A A strutural equation methodology is employed to better model measurement error and errors in equations imultaneously. The results show that labor force participation of wife and fertility do not appear to be causally related. Rather, social forces within the family function as common antecedents, thereby producing a spurious observed bivariate association. This implies that labor force participation and fertility decision entail joint decision making and influence. Another implication is that the decision process seems to be neither atomistic nor necessarily sequential. The present study also differs from previous efforts in the methodology employed. Variables were operationalized in concert with sociological theory--social variables were used to explain social outcomes.     

The effects of internal migration on the relative economic status of women and men

This article examines recent internal migration patterns for the United States workforce and contrasts household earnings outcomes for movers and nonmovers by sex and marital status. Three aspects of how migration affects the relative economic status of women and men are considered: 1) the importance of relative economic opportunities for husband and wife for the decision as to whether or not to move; 2) actual economic outcomes for movers relative to nonmovers; and 3) the effect of moving on relative earnings within married-couple households. We find that the decision to move is consistent with a common preference model of household decisionmaking and that the recently available range of opportunities to migrate has had little effect on the earnings composition of married-couple and single male households, but has benefited single women.     

POSITIONAL POWER, CLASS, AND INDIVIDUAL EARNINGS INEQUALITY: Advancing New Structuralist Explanations

This article seeks to advance "new structuralist" theory by considering the effects of positional power and class on individual earnings. We contend that positional power, that is the power wielded by workers employed in industries in an interdependent economy, confers upon workers the potential to disrupt system-wide production and creates leverage to demand higher earnings from employers. We demonstrate that positional power, in particular the per worker volume of goods and services received from other industries (or upstream production), increases workers' earnings net of sociodemographic variables and other plausible structural sources of earnings determination. We suggest that the threat of disrupting upstream production holds greater earnings potential than disrupting downstream production because of the profit realization problems associated with the former. We also show that the positive effects of positional power are not evenly distributed across the class structure, but rather are concentrated among non-owning classes who display a social control function in the labor process. We discuss the implications of our research for future new structuralist research.