CERGE-EI Working Paper Series No. 457
62 Pages Posted: 27 Apr 2012
Date Written: April 1, 2012
We identify the causal effect of cognitive abilities on economic behavior in an experimental setting. Using a forecasting task with varying cognitive load, we identify the causal effect of working memory on subjects' forecasting performance, while also accounting for the effect of other cognitive, personality and demographic characteristics. Addressing the causality is important for understanding the nature of various decision-making errors, as well as for providing reliable policy implications in contexts such as student placement, personnel assignment, and public policy programs designed to augment abilities of the disadvantaged. We further argue that establishing the causality of cognitive abilities is a prerequisite for studying their interaction with financial incentives, with implications for the design of efficient incentive schemes.
Keywords: Cognitive ability, Causality, Experiment, Financial incentives, Performance, Working memory
JEL Classification: C81, C91, D80, D83, J24
Suggested Citation: Suggested Citation
Rydval, Ondrej, The Causal Effect of Cognitive Abilities on Economic Behavior: Evidence from a Forecasting Task with Varying Cognitive Load (April 1, 2012). CERGE-EI Working Paper Series No. 457. Available at SSRN: https://ssrn.com/abstract=2046942 or http://dx.doi.org/10.2139/ssrn.2046942