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Abstract:
We experimentally disentangle the effect of information feedback from the effect of investment flexibility on the investment behavior of a myopically loss averse investor. Our findings show that varying the information condition alone suffices to induce behavior that is in line with the hypothesis of Myopic Loss Aversion.

Myopic loss aversion, information feedback, commitment, investment flexibility

Abstract:
This paper analyzes data for a random sample drawn from the Dutch population who reveal their propensity to invest and reward investments in building up social capital by means of an economic experiment. We find substantial heterogeneity in the propensity to invest and in the propensity to reward investments. In particular, we find strong evidence that the young, elderly, and low educated individuals invest relatively less, but are relatively more likely to reward investments in social capital. On the other hand, labor market participation, income, and religion do not have any significant impact on behavior in the experiment.

social capital investments, experimental economics, representative samples

Abstract:
This paper combines an economic experiment with survey data to investigate determinants of trust and trustworthiness in the Dutch society. We contrast the inferences which can be made on the trust propensity using stated and revealed measures and we test for participation bias in our experiment. We find that middle aged and educated individuals trust relatively more but are relatively less trustworthy. The effect of age and religion on trust is shown to depend heavily on whether experimental or survey trust measures are used. We find no evidence of participation bias in any experimental decisions.

Measuring trust and trustworthiness, Economic experiments, Representative samples

Abstract:
We present results from a field experiment testing the gift-exchange hypothesis inside a tree-planting firm paying its workforce incentive contracts. Firm managers told a crew of tree planters they would receive a pay raise for one day as a result of a surplus not attributable to past planting productivity. We compare planter productivity - the number of trees planted per day - on the day the gift was handed out with productivity on previous and subsequent days of planting on the same block, and thus under similar planting conditions. We find direct evidence that the gift had a significant and positive effect on daily planter productivity, controlling for planter-fixed effects, weather conditions and other random daily shocks. Moreover, reciprocity is the strongest when the relationship between planters and the firm is longterm.

reciprocity, gift exchange, incentive contracts, field experiments

Abstract:
We present results from a field experiment testing the gift-exchange hypothesis inside a tree-planting firm paying its workforce incentive contracts. Firm managers told a crew of tree planters they would receive a pay raise for one day as a result of a surplus not attributable to past planting productivity. We compare planter productivity - the number of trees planted per day - on the day the gift was handed out with productivity on previous and subsequent days of planting on the same block, and thus under similar planting conditions. We find direct evidence that the gift had a significant and positive effect on daily planter productivity, controlling for planter-fixed effects, weather conditions and other random daily shocks. Moreover, reciprocity is the strongest when the relationship between planters and the firm is long term.

Reciprocity, gift exchange, incentive contracts, field experiments

Abstract:
We present results from a real-effort experiment, simulating actual work-place conditions, comparing the productivity of workers under fixed wages and piece rates. Workers, who were paid to enter data, were exposed to different degrees of peer pressure under both payment systems. The peer pressure was generated in the form of private information about the productivity of their peers. We have two main results. First, we find no level of peer pressure for which the productivity of either male or female workers is significantly higher than productivity without peer pressure. Second, we find that very low and very high levels of peer pressure can significantly decrease productivity (particularly for men paid fixed wages). These results are consistent with models of conformism and self-motivation.

peer effects, fixed wages, piece rates, gender

Abstract:
The, often observed, positive correlation between incentive intensity and risk has been explained in two ways: the presence of transaction costs as determinants of contracts and the sorting of risk-tolerant individuals into firms using high-intensity incentive contracts. The empirical importance of sorting is perhaps best evaluated by directly measuring the risk tolerance of workers who have selected into incentive contracts under risky environments. We use experiments, conducted within a real firm, to measure the risk preferences of a sample of workers who are paid incentive contracts and face substantial daily income risk. Our experimental results indicate the presence of sorting; workers in our sample are risk-tolerant. Moreover, their level of tolerance is considerably higher than levels observed for samples of individuals representing broader populations. Interestingly, the high level of risk tolerance suggests that both sorting and transaction costs are important determinants of contract choices when workers have heterogeneous preferences.

risk aversion, sorting, incentive contracts, field experiments

Abstract:
We combine the choice data of proposers and responders in the ultimatum game, their expectations elicited in the form of subjective probability questions, and the choice data of proposers ("dictators") in a dictator game to estimate a structural model of decision making under uncertainty. We use a large and representative sample of subjects drawn from the Dutch population. Our results indicate that there is considerable heterogeneity in preferences for equity in the population. Changes in preferences have an important impact on decisions of dictators in the dictator game and responders in the ultimatum game, but a smaller impact on decisions of proposers in the ultimatum game, a result due to proposer's subjective expectations about responders' decisions. The model which uses subjective data on expectations has better predictive power and lower noise level than a model which assumes that players have rational expectations.

ultimatum game, inequity aversion, subjective expectations

Abstract:
Because their departures are difficultly observed, little is known about the performance of immigrants who leave a region and move to another. This paper shows conditions under which the (conditional) outmigration probability, work probability and the expected earnings of outmigrants are nonparametrically identified using data on immigrant sample attrition. We present an econometric model which extracts the information on outmigration behavior from sample attrition and allows to incorporate unobserved heterogeneity in the choice process in a very natural way, a feature not previously possible. The method presented in the paper is general enough to estimate models of internal and external migration. We apply our framework to estimate a panel data model where immigrants can choose whether to stay or leave a country. The model is estimated using the German Socio-Economic Panel (GSOEP). Outmigrants are found to have significantly lower labor market earnings and work propensities than permanent migrants.

outmigration, identification, panel data models

Abstract:
We specify and estimate an econometric model which separately identifies distributional preferences and the effects of perceived intentions on responder behavior in the ultimatum game. We allow the effects of perceived intentions to depend, among other things, on the subjective probabilities responders attach to the possible offers. We estimate the model on a large representative sample from the Dutch population. We find that the relative importance of distributional preferences and perceived intentions depends significantly on the socioeconomic characteristics of responders. Strong inequity aversion to the other player's disadvantage is found for lower educated and older respondents. Responders tend to punish unfavorable offers more if they expect that fair proposals will occur with higher probability.

Inequity aversion, intentions, subjective expectations

Abstract:
This paper estimates a structural dynamic life-cycle model of outmigration where, in each period, immigrants choose whether to work in the host country, not to work but remain in the host country, or outmigrate. The model incorporates several features of existing life-cycle theories of outmigration but distinguishes itself by introducing uncertainty in about future earnings and preferences which allows immigrants to revise their duration decisions throughout their migration experience. We overcome the problem of not directly observing outmigration movements by using panel attrition as a proxy variable and use a simple method to correct for the fact that part of the attrition is not a consequence of outmigration. Estimates are used to predict changes in life-cycle patterns of outmigration behavior. Estimation results indicate that outmigration does not depend exclusively on earnings differentials. Estimated assimilation rates are found to be robust to selection effects. Immigrants are found to be forward looking decision makers, and simulations show that predicted migration durations are very sensitive to changes in their economic environment and differ considerably from those of a myopic model.

outmigration, structural dynamic programming models

Abstract:
We use spline interpolation to approximate the subjective cumulative distribution function of an economic agent over the future realization of a continuous (possibly censored) random variable. The method proposed exploits information collected using a small number of probability questions on expectations and requires a weak prior knowledge of the shape of the underlying distribution. We find that eliciting 4 or 5 points on the cumulative distribution function of an agent is sufficient to accurately approximate a wide variety of underlying distributions. We show that estimated moments of general functions of the random variable can be computed analytically and/or using standard simulation techniques. We illustrate the usefulness of the method by estimating a simple model to asses the impact of expectations on investment decisions in a commonly used trust game.

approximation of subjective expectations, spline interpolation, decision making under uncertainty

Abstract:
We investigate the economic relevance and the composition of gifts within a firm where output is contractible. We develop a structural econometric model that identifies workers’ optimal reaction to monetary gifts received from their employer. We estimate the model using data from two separate field experiments, both conducted within a tree-planting firm. We use the estimated structural parameters to generalize beyond the experiment, simulating how workers would react to different gifts on the part of the firm, within different labour-market settings. We find that gifts have a role to play within this firm, increasing in importance when the workers’ outside alternatives deteriorate. Profit-maximizing gifts would increase profits within slack labour markets by up to 10% on average and by up to 17% for certain types of workers. These gifts represent significant increases in worker earnings; the average gift paid to workers attains 22% of average expected earnings in the absence of gifts. We find that gifts should be given by setting piece-rates above the market-clearing level rather than through fixed wages.

gift giving, structural models, field experiments

Abstract:
By analyzing earnings of observed immigrants workers, the literature on the economic assimilation of immigrants has generally overlooked two potentially important selectivity issues. First, earnings of immigrant workers may differ substantially from those of non-workers. Second, earnings of immigrants who do not return to their native country may differ from earnings of outmigrants. Economic theory has contradictory predictions on the signs of these potential selection biases. This paper uses data drawn from 8 waves of the German Socio-Economic Panel and estimates a three-equation model of income, work and outmigration decisions taking into account time-invariant unobserved heterogeneity across individuals. We find strong evidence in favor of negative outmigration selection in both the earnings and work equations. Simulation results show that the magnitude of the outmigration bias is important.

Economic Assimilation, Return Migration