Gender differences in risk behavior and the link to household effects and individual wealth

This study examined the differences in risk behavior between men and women using a household survey that captured the risk preferences of two members in a household and recorded wealth at the individual level instead of the usual approach of representing wealth at the household level. After controlling for commonly used explanatory variables, such as gender, education, age, and wealth, household fixed effects explain about 15% of the variation in risk behavior. This highlights the magnitude of household effects in shaping one’s risk behavior. In general, females in the study area are more risk averse than males based on a risk game with real payout. The gender differences disappear when focusing on only the top land owners. However, even in those cases, females consider themselves more risk averse, supporting results from previous studies that link culture and societal norms to the gender differences in risk behavior.     

Emergence of entrepreneurial behaviour: The role of age-based self-image

This study introduces an individual’s perception of their entrepreneurial potential in terms of their age (age-based self-image) to complement chronological age as a predictor of entrepreneurial behaviour. The principal hypothesis is that a positive age-based self-image enhances the likelihood of individuals turning their intention to start a business into actual behaviour. The empirical analysis based on data collected on the general adult population of Finland in 2011 and 2012 (n = 672) supports this hypothesis. The analysis further shows that this positive effect is independent of the individual’s chronological age, and it is thus applicable to both age groups that are under-represented in entrepreneurship: ‘youngsters’ and ‘seniors’. Promoting the development of a positive age-based self-image is a prospective policy option for fostering entrepreneurship among younger and older age groups. More in-depth research, especially concerning the antecedents of positive age-based self-image, is required for the effectiveness of such policy interventions.     

Sources of information and portfolio allocation

This research investigates the relationship between how a household receives financial information and the degree to which investment portfolios are diversified. Diversification is measured as allocation across asset classes and share of assets held in each asset class. Propensity score-based techniques incorporating stratification and weighting are employed to better isolate causal links, while also controlling for objective and subjective financial literacy and overconfidence. Results indicate that the use of financial planners and brokers is associated with an increase in asset class diversification. Households that consult with financial planners and bankers allocate their wealth systematically different from those who do not. These results highlight the role that financial professionals play in helping households make investment decisions.     

Spillovers from targeting of incentives: Exploring responses to being excluded

A growing set of policies involve transfers conditioned upon socially desired actions, such as attending school or conserving forest. However, given a desire to maximize the impact of limited funds by avoiding transfers that do not change behavior, typically some potential recipients are excluded on the basis of their characteristics, their actions or at random. This paper uses a laboratory experiment to study the behavior of individuals excluded on different bases from a new incentive that encourages real monetary donations to a public environmental conservation program. We show that the donations from the individuals who were excluded based on prior high contributions fell significantly. Yet the rationale used for exclusion mattered, in that none of the other selection criteria used as the basis for exclusion resulted in negative effects on contributions.     

Gambling versus investment: Lay theory and loss aversion

Gambling and investment are two domains that involve financial decisions. The present research investigates people’s lay theories about gambling and investment, and how these lay theories affect loss aversion in these domains. Lay people’s understanding of gambling and investment is often largely based on information that is immediately available to them. Moreover, information about losing money by gambling and earning money through investments are more predominant than information about earning money by gambling and losing money through investments. Hence, we hypothesized and found that people tend to hold lay theories that gambling is more likely to cause losses and less likely to bring gains compared to investment (Study 1); and we observed a stronger loss aversion when the same monetary decision was framed as gambling rather than as an investment (Studies 2 to 6). This domain-framing effect held in both hypothetical and incentivized settings.     

From dual processes to multiple selves: Implications for economic behavior

This article presents a short review of dual-process and dual-system theories from social and cognitive psychology and comments on their relevance for research on economic behavior. We view dual-process theories as a theoretical scaffolding which helps structure and interpret experimental results and can deliver important insights on human behavior in economic contexts. Dual-process ideas and concepts have already started to percolate into economics, contributing to the behavioral turn and the incorporation of bounded rationality into economic theory. The most recent development in this direction is represented by multiple selves models, which we view as a promising first step. We conclude the article with a brief discussion of the remaining articles in the special issue.     

Poverty identity and preference for challenge: Evidence from the U.S. and India

One’s personal identity can play an important role in decision-making. We propose that a key identity that shapes behavior among poor populations is conceptualizing oneself as financially insecure, which we term “poverty identity.” Two experiments suggest that this identity can influence one’s propensity to engage in challenging tasks. We first demonstrate in a lab experiment with students that making financial insecurity temporarily salient can reduce preference for challenging tasks. Subsequently, in a lab-in-field experiment conducted in Dharavi, a slum in Mumbai, India, we show that a verbal self-affirmation intervention involving simple, one-on-one conversations with each individual can counteract the effects of persistent identity salience for the poor by fostering greater preference for more challenging labor tasks. We suggest that the persistence of scarcity can make poverty a continually salient characteristic by which the truly impoverished define who they are. Further, we outline an identity-based theoretical framework that explains behavior among people who temporarily feel poor but also suggests that similar perturbations in identity salience may have a negligible impact on behavior among the very poor. These findings have important implications for models of identity and policy design aimed at improving well-being for disadvantaged populations.     

Team versus individual behavior in the minimum effort coordination game

We compare coordination success of individuals and teams in the minimum effort coordination game. The game is played by groups of either five individuals or five two-person teams with either fixed or random re-matching protocols. When groups are fixed, teams perform at least as well as individuals, if not better, in terms of coordinating to the payoff dominant outcome. But with random re-matching, teams experience pervasive coordination failures. A public recommendation to a strategy or a performance bonus exhorting players to coordinate to the payoff-dominant equilibrium has similar impact on coordination for both individuals and teams playing with fixed matching. However, coordination is far more difficult to achieve with teams playing under random re-matching. Our results have implications for the design of work-groups in organizations.     

Austerity plan announcements and the impact on the employees’ wellbeing

This study investigates the impact of austerity plan announcements on employees’ wellbeing. We exploit the unexpected announcement of a drastic wage cut (25%) related to public sector employees in Romania. Using data from the Eurobarometer Surveys and the European Quality of Life Survey, we employ a difference-in-difference research design combined with matching, based on entropy balancing, to identify the causal effects. Our results reveal that the mere announcement of austerity measures leads to an overall drop in life satisfaction among those working in the public sector. We also show that men, and especially married individuals, are most affected by the substantial wage cut announcement. Contrary to previous research, we find that public sector employees with higher levels of education are more likely to be affected by this policy communication compared to those with only secondary or primary levels of education. Our results also suggest that the negative effect of the announcement is not persisting over time.