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2nd briq Summer School in Behavioral Economics

What our participants say…

“I got to see the bigger picture for the field, as well as being exposed to a more systematic, methodological way of approaching the field. I think it will help my research in keeping my approach more rigorous and systematic.”

“I learned that different methods can complement each other (like empirical data, lab, and field experiments) and I don’t have to clarify myself as an “experimental person,” for example. I also learned about interesting debates in the field, and how to form criticisms and approach a question.”

“The faculty members were super approachable and helpful during the lectures, the sign-ups, and the discussions in the breaks, as well. Everyone was interested in what I’m doing and gave very useful pieces of advice.”

“I most enjoyed the big picture lectures that went beyond individual papers (though these were great, too).”

“The summer school definitely highlighted the importance and benefits of working at the intersection between theoretical and empirical work.”

“It would be very interesting to see different faculty members discussing/debating over certain topics, given how different perspectives they have.”

“There are very diverse approaches to behavioral economics. Some convergence might be helpful, i.e. there is reason to treat them as less mutually-exclusive approaches as they have been so far.“

“There are still a lot of open interesting research questions, lots of inspiration.”

“It gave me extra energy to talk to enthusiastic and passionate behavioral scientists.”

“Behavioral IO-type models are really interesting, and I wasn’t aware of their existence. I learned to think of research agendas in a broader sense, not paper by paper.”

“I learned that behavioral economics is a mid-sized family.”

[Program – PDF]

Recent awards and grants for briq researchers

Chris Roth won the CESifo Distinguished Affiliate Award in Employment and Social Protection for his paper on Beliefs about Racial Discrimination and Support for Pro-Black Policies. In this joint work with Ingar Haaland (University of Bergen), he shows that Democrats and Republicans differ substantially in their beliefs about the extent of hiring discrimination against blacks. While these differences become smaller as people are exposed to scientific evidence, this does not lead to a similar convergence in support for pro-black policies to combat racial discrimination.

Together with Simon Jäger (MIT) and Benjamin Schoefer (UC Berkeley), Chris also successfully applied for inclusion of survey questions in the SOEP Innovation Sample (SOEP IS), which offers great potential as a source of household micro-data, particularly for researchers seeking specific information on households or on people’s opinions.

Matt Lowe was awarded a grant by the International Growth Centre in support of the delivery of the IGC India (Bihar) program funded by the Bill & Melinda Gates Foundation. He will use the funds for a joint project on “Norm Transmission among Bureaucrats” with Ray Fisman (Boston University) and Nishith Prakash (University of Connecticut).

briq student fellow portraits: Peter Andre

The briq scholarship program supports about 25 Ph.D. students at the Bonn Graduate School of Economics. Some of them are directly involved in briq research activities. In a series of short portraits, the briq newsroom introduces our student fellows and what they do. One of them is Peter Andre, who has been at briq since October 2016.

What kind of topics are you working on?

My current research focuses mostly on beliefs and perception. Beliefs matter not only for decision-making under risk as traditional economics would claim. They can matter whenever behavior and reasoning depend on the environment – which is to say: virtually always. It’s usually our perception of the environment, our mental representations, that shape our thoughts and conduct. Now, in some cases, it may be reasonable to assume that our perceptions are correct and reflect what’s out there. However, we know already that this assumption will lead us astray in many important settings: educational or financial decisions, parenting, causal or political reasoning, and social or moral behavior.

Can you give an example?

In a project with Chris Roth, Johannes Wohlfart, and Carlo Pizzinelli, we study macroeconomic belief formation. We analyze how unemployment and inflation expectations react to hypothetical exogenous shocks such as changes in the oil price or federal funds rate. These beliefs are important because they can determine the trajectory of the economy and the effectiveness of policies. They can fuel booms and busts. So are they formed in line with standard macroeconomic models? It turns out that forecasts are often off the mark. This holds particularly for inflation forecasts and respondents with little knowledge and exposure to education.

What is a typical problem you are facing in your research?

In the context of beliefs, measurement is a huge challenge. You often face a trade-off between making the elicitation technique easy to understand for the respondent and theoretically sound.

You also spent two months in Papua New Guinea for field work. What brings an economist to that remote part of the world?

One of the traditional themes in behavioral economics: social behavior. I worked on a project with Andreas Pondorfer and Susann Adloff in the province of Bougainville. We elicited beliefs about what is socially appropriate behavior in different communities and investigated how this perception and the structure of the social network shape behavior and social-image effects.

While overseas, I also experienced personally how crucial perception is. The Bougainvilleans literally live in a different world. As an outsider, foreign to their fascinating culture and norms, I probably misunderstood many of their gestures and statements – and vice versa. On one day, two lunchs were prepared for me at different places – without me knowing about this. And the lunch that I arranged with my host was surprisingly cancelled. I still don’t fully understand what happened.

Michela Carlana on stereotypes and biased behavior

In her first lecture as part of the briq short lecture series, Michela Carlana (Harvard Kennedy School) presented her work on the effect of teacher stereotypes on student outcomes. She focused in particular on gender stereotypes providing evidence from the Italian context. Her work shows that teachers’ gender stereotypes have a negative effect on girls’ performance and self-confidence in own math abilities. Furthermore, stereotypes induce girls to underperform in math and self-select into less demanding high schools, following the track recommendation of their teachers.

Which kind of public policies could be implemented to mitigate the negative effect of exposure to stereotypes? In the second lecture, Michela addressed this issue by analyzing two types of policies. First, she discussed potential debiasing intervention with teachers and parents, and she provided evidence from a recent working paper on the effect of revealing own stereotypes against immigrants to teachers. The study shows that increasing awareness of teachers on own stereotypes reduces bias in grading against immigrants.

Second, she analyzed interventions with students to mitigate constraints induced by stereotypes: for example, the project “Girls Code It Better” is aimed at decreasing the vulnerability of girls to the exposure of the belief that “women are inherently less fit for math and tech fields than men”. In the context of bias against immigrants, she provides evidence of the positive impact of a large-scale randomized control trial targeted at high-achieving students and aimed at tackling their educational segregation in vocational schools.

briq Beliefs Workshop

Conventional economics assumes that people desire information only because it helps them to make better decisions, and that they adjust their beliefs in response to new evidence. In reality, people often cherish their clearly misguided beliefs, defend them from perceived challenges, and can be hostile to those who hold different views. Examples include climate change denial and the anti-vaccination movement as well as managers who are overconfident about their skills and achievements.

To explain these phenomena, behavioral economists have developed the concept of “belief-based utility”, whereby the utility people derive from their convictions as such can make them cling to wrong beliefs even against all common sense. In the briq Beliefs Workshop, researchers presented and discussed novel findings spanning various facets of this topic – ranging from the role of political convictions to information avoidance and selective memory.

Voting decisions in the U.S. election reflected the match between voters’ and candidates’ moral values.

Several presentations highlighted the importance of beliefs and values as drivers of economic decision-making. Benjamin Enke linked voting behavior in recent U.S. presidential elections to beliefs about what is “right” and “wrong”: Whereas some individuals’ notion of morality is centered around “universal” values such as individual rights, justice and fairness, others emphasize “communal” values like loyalty, respect and tradition. For instance, while Donald Trump’s speeches focused on communal values, Hillary Clinton had rather drawn on universal vocabulary. To a significant extent, voting decisions in the election reflected the match between voters’ and candidates’ moral values, which accounted for 20% of the variation in voting behavior. Enke resumed that recent shifts towards communal values especially in rural areas of the U.S. might contribute to increasing political polarization.

Beliefs and educational choices

With regard to educational choices, Teodora Boneva presented the results of a large-scale survey on undergraduate students’ beliefs about the advantages and disadvantages of pursuing a postgraduate degree. The study uncovered that students whose parents obtained a university education are generally more optimistic than first-generation students: They expect a better social life and financial situation as well as more parental support during their postgraduate education. Moreover, they anticipate a stronger positive effect of a postgraduate degree on future earnings. These findings are important because they can explain why students from better socioeconomic backgrounds are more likely to enroll in postgraduate programs, despite efforts from universities to attract first-generation students.

Competitiveness is predictive of educational attainment and earnings.

Muriel Niederle analyzed the importance of competitiveness for education and labor market outcomes using a large data panel in the Netherlands. Together with her co-authors, she found that competitiveness is at least as predictive for educational attainment and earnings as risk attitudes and a set of commonly analyzed psychological traits like conscientiousness, extraversion and agreeableness. Her findings also confirm the results of her previous work, which showed that gender differences in competitiveness can explain about one fifth of the gender gap in career choices.   

Beliefs and overconfidence

A second focus of the workshop was on how people’s beliefs are skewed towards what they want to be true. For example, Botond Köszegi presented theoretical work based on the observation that people tend to be overconfident and showed that this may result in prejudices. If individuals are generally too optimistic with regard to their ability, they will perceive their group to be discriminated against because they do not receive as much recognition as they think they should. This can explain the occurrence of two socially problematic phenomena: On the one hand, people tend to have overly positive perceptions of groups they are members of, while other groups they do not belong to are perceived too negatively. On the other hand, individuals from different groups disagree over the degree of discrimination.

Positively biased memory of own performance makes managers persistently overconfident.

In his presentation on the role of biased memory for manager overconfidence, David Huffman addressed the question of how overconfidence can persist despite repeated performance feedback. He and his co-authors analyzed the beliefs of store managers who receive about a fifth of their salary in the form of bonus payments, which depend on their relative performance rank among all stores owned by the company. Managers are ranked and awarded bonus payments quarterly, so they receive repeated feedback about their relative performance. Huffman and his team found that managers were persistently overconfident regarding their future performance. Moreover, those with a more positively distorted recall of their previous rank displayed the highest degree of overoptimism. This result provides new evidence for an important mechanism people use to sustain biased beliefs.

However, people’s beliefs are also shaped by their economic experiences. In the context of the 2015 Israeli elections, Moses Shayo demonstrated that participation in financial markets can affect political beliefs: Voters who were randomly assigned either Palestinian or Israeli stocks prior to the election were six percentage points more likely to vote for parties supportive of the peace process than their counterparts who had not received any assets. More than 30% of the effect can be explained by the observation that being exposed to financial markets reduced participants’ opposition to concessions for peace, and increased their awareness of the economic risks and consequences of conflict.

This is only a small selection of the large number of high-quality papers presented at the workshop.
View the full list of presentations here.

briq/IZA Workshop on Behavioral Economics of Education

Can behavioral insights be used to shape educational decision-making and student achievement? How should we design education policy, teacher incentives or interventions to address the shortcomings in decision-making by parents, students and teachers? To answer these questions, the briq/IZA Workshop on Behavioral Economics of Education brought together 26 researchers in Bonn to present their work.

Feedback on teacher performance

The first presentation of the workshop,“Repeated Praise – Evidence from a Field Experiment”, studies how providing teachers with relative performance feedback affects changes in teaching effectiveness. Maria Cotofan shows that teachers who receive repeated recognition of their work become better at preparing students for centralized exams. The study suggests that such feedback could be an effective policy tool to raise student performance.

Mentoring programs for children

The paper “(In)Equality of Opportunity, Mentoring, and Critical Educational Decisions”, presented by Armin Falk, shows that parental education is a key determinant of educational success and that intergenerational educational mobility is particularly low in Germany. According to the study, a one-year child mentoring intervention effectively increases equality of opportunity. Children from disadvantaged family backgrounds especially benefit from the mentoring intervention and become more likely to attend the academic high school track (Gymnasium) in Germany. The paper highlights that educational careers are malleable and that the social environment can have lasting effects on student lives.

Female math teachers as role models

Alex Eble presented his paper “Stereotypes, role models, and the formation of beliefs”, which establishes that girls in Chinese middle schools perform better when having a female math teacher. He shows that this effect can be explained by changes in beliefs and aspirations as well as parental investments. Given that women remain underrepresented in math-intensive subjects, this research suggests that gender equality could be increased by providing girls with same-gender role models.

See the workshop program for a full list of presentations.