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Working Paper
Financial literacy and subprime mortgage delinquency: evidence from a survey matched to administrative data
The exact cause of the massive defaults and foreclosures in the U.S. subprime mortgage market is still unclear. This paper investigates whether a particular aspect of borrowers' financial literacy?their numerical ability?may have played a role. We measure several aspects of financial literacy and cognitive ability in a survey of subprime mortgage borrowers who took out mortgages in 2006 or 2007 and match these measures to objective data on mortgage characteristics and repayment performance. We find a large and statistically significant negative correlation between numerical ability and ...
Working Paper
Another hidden cost of incentives: the detrimental effect on norm enforcement
Monetary incentives are often considered as a way to foster contributions to public goods in society and firms. This paper investigates experimentally the effect of monetary incentives in the presence of a norm enforcement mechanism. Norm enforcement through peer punishment has been shown to be effective in raising contributions by itself. We test whether and how monetary incentives interact with punishment and how this in turn affects contributions. Our main findings are that free riders are punished less harshly in the treatment with incentives, and as a consequence, average contributions ...
Journal Article
When donors feel generous: economic research on prosocial behavior
New research shows that people donate time and money at the level of peers to groups with which they identify?and that they want to see the impact of their giving. Nonprofits seeking volunteers and funds will find the insights useful.
Working Paper
Doing good or doing well? Image motivation and monetary incentives in behaving prosocially
This paper examines image motivation?the desire to be liked and well-regarded by others? as a driver in prosocial behavior (doing good), and asks whether extrinsic monetary incentives (doing well) have a detrimental effect on prosocial behavior due to crowding out of image motivation. ; By definition, image depends on one?s behavior being visible to other people. Using this unique property we show that image is indeed an important part of the motivation to behave prosocially. Moreover, we show that extrinsic incentives interact with image motivation and are therefore less effective in public ...
Working Paper
Do subsidies increase charitable giving in the long run?: matching donations in a field experiment
Subsidizing charitable giving, for example, for victims of natural disasters, is very popular, not only with governments but also with private organizations. Many companies, for example, match their employees? charitable contributions, hoping that this will foster the willingness to contribute. However, systematic analyses of the effect of such a matching mechanism are still lacking. ; This paper tests the effect of matching charitable giving in a randomized field experiment in the short and the long run. The donations of a randomly selected group were matched by contributions from an ...
Discussion Paper
Deciding to distrust
We employ experiments to illustrate one factor contributing to the lack of distrust in the recent corporate scandals: Trust rather than no trust was the default. People are more trusting when the default is full trust than when it is no trust. We introduce a new game, the distrust game (DTG), where the default is full trust and find that in it, trust levels are higher than in the Berg, Dickhaut, and McCabe (1995) trust game (TG), where the default is no trust. At the same time, trustworthiness levels are lower in the DTG than in the TG. Agents (second movers) punish distrust more in the DTG ...
Working Paper
The impact of group membership on cooperation and norm enforcement: evidence using random assignment to real social groups
Due to incomplete contracts, efficiency of an organization depends on willingness of individuals to take non-selfish actions, such as cooperating when there is no incentive to do so or punishing inefficient actions by others. Organizations also constitute a social boundary, or group. We investigate whether this social aspect of organizations has an important benefit? fostering unselfish cooperation and norm enforcement within the group?but also whether there is a dark side, in the form of hostility between groups. Our experiment provides the first evidence free from the confounding effect of ...
Working Paper
Do people behave in experiments as in the field?: evidence from donations
Laboratory experiments are an important methodology in economics, especially in the field of behavioral economics. However, it is still debated to what extent results from laboratory experiments can be applied to field settings. One highly important question with respect to the external validity of experiments is whether individuals act the same in experiments as they would in the field. ; This paper presents evidence on how individuals behave in donation experiments and how the same individuals behave in a naturally occurring decision situation on charitable giving. The results show that ...
Working Paper
A survey of economic theories and field evidence on pro-social behavior
In recent years, a large number of economic theories have evolved to explain people?s pro-social behavior and the variation in their respective behavior. This paper surveys economic theories on pro-social behavior and presents evidence ? mainly from the field ? testing these theories. In addition, the survey emphasizes that institutional environment might significantly interact with pro-social preferences and explain some of the variation in observed pro-social behavior.
Discussion Paper
Why does unemployment hurt the employed?: evidence from the life satisfaction gap between the public and private sectors
High rates of unemployment entail substantial costs to the working population in terms of reduced subjective well-being. This paper studies the importance of individual economic security, in particular, job security, in workers' well-being by exploiting sector-specific institutional differences in the exposure to economic shocks. Public servants have stricter dismissal protection and face a lower risk of their organization's bankruptcy than do private sector employees. The empirical results for individual panel data for Germany and repeated cross-sectional data for the United States and the ...