Numeracy and wealth

Numeracy is defined as the ability to understand and use numerical information. We examined the relationship between numeracy and wealth using a cross-sectional and a longitudinal study. For a sample of approximately 1000 Dutch adults, we found a statistically significant correlation between numeracy and wealth, even after controlling for differences in education, risk preferences, beliefs about future income, financial knowledge, need for cognition or seeking financial advice. Conditional on socio-demographic characteristics, our estimates suggest that on average a one-point increase in the numeracy score (11-point scale) of the respondent is associated with 5 percent more personal wealth. Additionally, we find that numeracy is a key determinant of the wealth accumulation trajectories that people follow over time. Over a 5-year period, while participants with low numeracy decumulate wealth, participants with high numeracy maintain a constant positive level of wealth.     

Goal orientation and variety seeking behavior: The role of decision task

This research conducted two experiments to examine the interaction effect of decision task (sequential choices vs. simultaneous choices) and goal orientation (prevention focus vs. promotion focus) on variety-seeking behavior. In the sequential choices for sequential consumption condition (consumers buy one item at a time for each consumption occasion), promotion-focused consumers tend to select a greater variety of items (a higher extent of variety-seeking) than prevention-focused consumers. In contrast, in the simultaneous choices for sequential consumption condition (consumers buy several items at a time for each following consumption occasion), prevention-focused consumers tend to select a greater variety of items (a higher extent of variety-seeking) than promotion-focused consumers.     

The psychology and behavioural economics of poverty

The paper provides an overview and assessment of an emerging literature on the psychology and behavioural economics of poverty. We particularly highlight poverty experiences, role of neighbourhoods, poverty dynamics and transmission, child poverty and disability and personal finance. In addition we consider psychology and policy responses by looking and autonomy and empowerment, and poverty reduction programs. Our central thesis is that the detailed knowledge of individual experiences, cognitions and social factors in psychology and related social science complements the traditional economic emphasis on structural factors and policy instruments in a way that is exemplified by emerging work in behavioural economics. We conclude it is increasingly recognised that poverty reduction policies which are informed by behavioural insights may, as a result, be more effective.     

EXPONENTIAL‐GROWTH BIAS AND LIFECYCLE CONSUMPTION

Exponential‐growth bias (EGB) is the tendency for individuals to partially neglect compounding of exponential growth. We develop a model wherein biased agents misperceive the intertemporal budget constraint, and derive conditions for overconsumption and dynamic inconsistency. We construct an incentivized measure of EGB in a US‐representative population and find substantial bias, with approximately one third of subjects estimated as the fully biased type. The magnitude of the bias is negatively associated with asset accumulation, and does not respond to a simple graphical intervention.     

Fertility decisions when infant survival is endogenous

There is evidence that fertility is positively correlated with infant mortality, and that a child‘s chance of surviving to maturity increases with the level of nutrition, medical care, etc. received in the early stages of life. By modelling parental decisions as a problem of choice under uncertainty, the paper shows that fertility and infant mortality are most likely to move in opposite directions if, as implicitly assumed by existing economic theories, parents believe that there is nothing they can do to improve the survival chances of their own children. By contrast, if parents realize that those chances improve with the amount they spend for the health, nutrition, etc. of each child that they put into the world, then fertility and infant mortality may move in the same direction. Under such an assumption, the model has the strong policy implication that directly death-reducing public expenditures are most effective, but stimulate population growth, at low levels of development. By contrast, at high levels of development, such expenditures tend to crowd out parental expenditures, and are a factor in fertility decline. Received: 14 October 1996 / Accepted: 28 July 1997     

Family structure,economic status,and educational attainment

This study examines the effect of family structure on high school graduation by race and gender using data from the first twenty-one waves of the Panel Study of Income Dynamics and recently available retrospective marital histories. The nature of the data allows for a more complete specification of family structure than has been heretofore possible. The analysis tests the hypothesis that the negative effect on educational attainment often associated with living in a mother-only or stepfather family stems primarily from the reduced level of economic resources available to these households. Empirical findings indicate that living with a widowed, divorced, or separated mother has little or no effect on educational attainment once we control for economic status. However, living in a stepfather family appears to have a persistent negative effect on high school graduation rates. Received: 24 July 1995 / Accepted: 9 September 1997     

One or two parents? Half or step siblings? The effect of family structure on young children's achievement

Do children who live with both biological parents fare better than children in other types of family structures? Does the presence of step or half-siblings affect child well-being? This study examines the effect of family structure on young children's achievement addressing two sources of potential bias: (1) misclassification of blended families and (2) the omission of within-family and individual time-invariant unobserved characteristics. The results show that family structure, when defined using traditional classifications, has little effect on young children's achievement test scores. When the definition of family type is expanded, living in a blended family and living in some types of single mother families, appears to have a small, unfavorable relationship with children's achievement.     

Economic growth and stagnation with endogenous health and fertility

This article offers a theory of economic growth, stagnation, and demo-economic transition that originates from external effects of child-bearing, health expenditure, and education under endogenous mortality. Facing a hierarchy of needs, parents always consume and want to have a family. Child quality, measured as a two-dimensional vector of child health and schooling, becomes only affordable when uncontrollable mortality is sufficiently low. Child quality expenditure initiates an economic take-off and convergence towards perpetual growth while its absence may cause convergence towards an equilibrium of economic stagnation and high fertility. This way, the article provides an explanation for diverging growth rates from a cross-country perspective.I would like to thank Noël Bonneuil, Piero Manfredi, Nikolaus Siegfried, Richard Tol, and two anonymous referees for useful comments. Responsible editor: Alessandro Cigno.     

Socio-economic determinants of suicide in Japan

Japan has the highest suicide rates among the OECD countries and this public health problem seems to be accelerating in over the recent decades. Investigating and understanding the suicidal behaviour is of crucial importance to society and health policy makers. Such an investigation could provide with useful information for those responsible in formulating the national policies on suicide prevention. This study estimates dynamic econometric models for total, male and female suicides in Japan for the period of 1957–2009. Using the ARDL approach to cointegration, we find that the associations of suicide with sociological factors (divorce and fertility rates) were stronger than those with economic factors (per capita GDP and unemployment) for females.     

Decomposing the age effect on risk tolerance

The importance of investment portfolio allocation has become more apparent since the onset of the late 2000s Great Recession. Individual willingness to take financial risks affects portfolio decisions and investment returns among other factors. Previous research found that people of different ages have dissimilar levels of risk tolerance but the effects of generation, period, and aging were confounded. Using the 1998–2007 Survey of Consumer Finances cross-sectional datasets, this study uses an analytical method to separate such effects on financial risk tolerance. Aging and period effects on financial risk tolerance were statistically significant. Implications for researchers and financial planning practitioners and educators are provided.