ABSTRACT: We study whether and when preferences for competition are a positive economic trait among high-earners and to what extent this trait can explain the gender gap in income among MBAs. Consistent with the experimental evidence, preferences for competition are a positive economic trait only for non-overconfident individuals. Preferences for competition correlate with income only at graduation when bonuses are guaranteed and not a function of performance. Overconfident, competitionloving MBAs have lower compensation and income growth, and experience greater exit from high-reward industries and more frequent job interruptions. Preferences for competition do not explain the gender pay gap among MBAs.

ABSTRACT: We study the effect of exposure to immigrants on the educational outcomes of U.S.-born students, using a unique dataset combining population-level birth and school records from Florida. This research question is complicated by substantial school selection of U.S.-born students, especially among White and comparatively affluent students, in response to the presence of immigrant students in the school. We propose a new identification strategy, comparing sibling outcomes with the inclusion of family fixed effects, to partial out the unobserved non-random selection of native-born families into schools. We find that the presence of immigrant students has a positive effect on the academic achievement of U.S.-born students, especially for students from disadvantaged backgrounds. Moreover, the presence of immigrants does not negatively affect the performance of affluent U.S.-born students, who typically show a higher academic achievement compared to immigrant students. We provide suggestive evidence on potential channels.

ABSTRACT: We study the causal effect of mood on the productivity of call-center workers. Mood is measured through an online "mood questionnaire" which the workers are encouraged to fill out daily. We find that better mood actually decreases worker productivity for workers whose compensation is largely fixed. The negative effect of mood is attenuated for workers whose compensation is based on performance (high-powered incentives). This finding holds both at a correlational level and in two IV settings, where mood is instrumented for by weather, or, alternatively, by whether the local professional sports team played/won the day before. We rule out a number of threats to the exclusion restrictions, and discuss the mechanisms that could generate our findings.

ABSTRACT: We study the effect of preferences for boys on the performance in mathematics of girls, using evidence from two different data sources. In our first set of results, we identify families with a preference for boys by using fertility stopping rules in a large population of households whose children attend public schools in Florida. Girls growing up in a boy-biased family score on average 3 percentage points lower on math tests when compared to girls raised in other types of families. In our second set of results, we find similar effects when we study the correlations between girls’ performance in mathematics and maternal gender role attitudes, using evidence from the National Longitudinal Survey of Youth. We conclude that socialization at home can explain a non-trivial part of the observed gender disparities in mathematics performance and document that maternal gender attitudes correlate with those of their children, supporting the hypothesis that preferences transmitted through the family impact children behavior.

ABSTRACT: Using mobile phone and survey data, we show that during the early phases of COVID-19, voluntary social distancing was greater in areas with higher civic capital and amongst individuals exhibiting a higher sense of civic duty. This effect is robust to including controls for political ideology, income, age, education, and other local-level characteristics. This result is present for U.S. individuals and U.S. counties as well as European regions. Moreover, we show that after U.S. states began re-opening, high civic capital counties maintained a more sustained level of social distancing, while low civic capital counties did not. Finally, we show that U.S. individuals report a higher tendency to use protective face masks in high civic capital counties. Our evidence points to the importance of considering the level of civic capital in designing public policies not only in response to pandemics, but also more generally.

ABSTRACT: Exploiting portfolio data and repeated surveys of an Italian bank’ clients we test whether investors’ risk aversion increases following the 2008 crisis. We find that, after the crisis, both qualitative and quantitative measures of risk aversion increase substantially and that affected individuals divest more from stock. We investigate four explanations: changes in wealth, expected income, perceived probabilities, and emotion-based changes of the utility function. Our data are inconsistent with the first two channels, while they suggest that fear is a potential mechanism underlying financial decisions, whether by increasing the curvature of the utility function or the salience of negative outcomes.

ABSTRACT: We study whether a positive historical shock can generate long-term persistence in development. We show that Italian cities that achieved self-government in the Middle Ages have a higher level of civic capital today than similar cities in the same area that did not. The size of this effect increases with the length of the period of independence and its intensity. This effect persists even after accounting for the fact that cities did not become independent randomly. We conjecture that the Middle-Age experience of self-government fostered self-efficacy beliefs’ in one’ own ability to complete tasks and reach goals’ and this positive attitude, transmitted across generations, enhances civic capital today. Consistently, we find that fifth-graders in former free city-states exhibit stronger self-efficacy beliefs and that these beliefs are correlated with a higher level of civic capital. (JEL: O43, P16, O10)

ABSTRACT: Entering a currency union without any political union European countries have taken a gamble: will the needs of the currency unions force a political integration (as anticipated by Monnet) or will the tensions create a backlash, as suggested by Kaldor, Friedman and many others? We try to answer this question by analyzing the cross sectional and time series variation in pro-European sentiments in the EU 15 countries. The 1992 Maastricht Treaty seems to have reduced the pro-Europe sentiment as does the 2010 Eurozone crisis. Yet, in spite of the worst recession in recent history, the Europeans still support the common currency. Europe seems trapped: there is no desire to go backward, no interest in going forward, but it is economically unsustainable to stay still.

ABSTRACT: While both cultural and legal norms (institutions) help foster cooperation, culture is the more primitive of the two and itself sustains formal institutions. Cultural changes are rarer and slower than changes in legal institutions, which makes it difficult to identify the role played by culture. Cultural changes and their effects are easier to identify in simpler, more controlled, environments, such as corporations. Corporate culture, thus, is not only interesting per se, but also as a laboratory to study the role of societal culture and the way it can be changed.

ABSTRACT: We study which dimensions of corporate culture are related to a firm’ performance and why. We find that proclaimed values appear irrelevant. Yet, when employees perceive top managers as trustworthy and ethical, firm’ performance is stronger. We then study how different governance structures impact the ability to sustain integrity as a corporate value. We find that publicly traded firms are less able to sustain it. Traditional measures of corporate governance do not seem to have much of an impact.

ABSTRACT: We use a combination of lab and field evidence to study whether highly-impatient individuals are more likely to procrastinate. To measure impatience, we elicit individual discount rates by giving participants choices between smaller-sooner and larger-later rewards. To measure procrastination, we record how fast participants complete three tasks: an online game, their application to the university, and a mandatory survey. We find that, consistent with the theory, impatient individuals procrastinate more, but only in tasks where there are costs to delay (the online game and university application). Since we paid participants by check to control for transaction costs, we are also able to determine whether the participants’ cashing behavior is consistent with the timing of their payment choice. We find substantial evidence of time inconsistency. Namely, more than half of the participants who received their check straight away instead of waiting two weeks for a reasonably larger amount, subsequently took more than two weeks to cash it.

ABSTRACT: Women outnumber men in undergraduate enrollments, but they are much less likely than men to major in mathematics or science or to choose a profession in these fields. This outcome often is attributed to the effects of negative sex-based stereotypes. We studied the effect of such stereotypes in an experimental market, where subjects were hired to perform an arithmetic task that, on average, both genders perform equally well. We find that without any information other than a candidate’s appearance (which makes sex clear), both male and female subjects are twice more likely to hire a man than a woman. The discrimination survives if performance on the arithmetic task is self-reported, because men tend to boast about their performance, whereas women generally underreport it. The discrimination is reduced, but not eliminated, by providing full information about previous performance on the task. By using the Implicit Association Test, we show that implicit stereotypes are responsible for the initial average bias in sex-related beliefs and for a bias in updating expectations when performance information is self-reported. That is, employers biased against women are less likely to take into account the fact that men, on average, boast more than women about their future performance, leading to suboptimal hiring choices that remain biased in favor of men.

ABSTRACT: We use survey data to measure households’ propensity to default on mortgages even if they can afford to pay them (strategic default) when the value of the mortgage exceeds the value of the house. The willingness to default increases both in the absolute and in the relative size of the home-equity shortfall. Our evidence suggests that this willingness is affected both by pecuniary and non-pecuniary factors, such as views about fairness and morality. We also find that exposure to other people who strategically defaulted increases the propensity to default strategically because it conveys information about the probability of being sued.

ABSTRACT: The World Values Survey (WVS) question on trust has been widely used to study the economic effect of trust. Recent work, however, questions its validity as an accurate measure of trust by showing that it is not correlated with the sender’s behaviour in the Berg et al. trust game. What measure then should we trust to measure trust? In this article, we argue that the sender’s behaviour in a trust game is driven both by beliefs and by preferences. In contrast, WVS-like measures capture mostly the belief based component of a trust game.

ABSTRACT: We present evidence from an experiment in which groups select a leader to compete against the leaders of other groups in a real-effort task that they have all performed in the past. We find that women are selected much less often as leaders than is suggested by their individual past performance. We study three potential explanations for the underrepresentation of women, namely, gender differences in overconfidence concerning past performance, in the willingness to exaggerate past performance to the group, and in the reaction to monetary incentives. We find that men's overconfidence is the driving force behind the observed prevalence of male representation.

ABSTRACT: We compare the trading performance of independent directors and other officers of the firm. We find that independent directors earn positive and substantial abnormal returns when they purchase their company stock, and that the difference with the same firm's officers is relatively small at most horizons. The results are robust to controlling for firm-fixed effects and to using a variety of alternative specifications. Executive officers and independent directors make higher returns in firms with the weakest governance and the gap between these two groups widens in such firms. Independent directors who sit on the audit committee earn higher returns than other independent directors at the same firm. Finally, independent directors earn significantly higher returns than the market when they sell the company stock in a window before bad news and around earnings restatements.

ABSTRACT: This paper reports a positive and statistically significant relation between the short-term discount rate over a monetary reward and the short-term discount rate over a primary reward (chocolate). This relation is most evident among people who like chocolate and are hungry. This finding suggests that this type of experiments identifies an underling individual trait, consistent with of present-biased preferences.

ABSTRACT: How much do cultural biases affect economic exchange? We try to answer this question by using data on bilateral trust between European countries. We document that this trust is affected not only by the characteristics of the country being trusted, but also by cultural aspects of the match between trusting country and trusted country, such as religion, history of conflicts, and genetic and somatic similarities. We then find that lower bilateral trust leads to less trade between two countries, less portfolio investment, and less direct investment, even after controlling for the characteristics of the two countries. This effect is stronger for goodsthat are more trust intensive. Our results suggest that perceptions rooted in culture are important (and generally omitted) determinants of economic exchange.

ABSTRACT: We study experimentally the effect of expectations on whether trust is repaid. Subjects respond with untrustworthy behavior if they see that little is expected of them. This suggests that guilt aversion plays an important role in the repayment of trust.

ABSTRACT: We evaluate the impact of the Sarbanes-Oxley Act (SOX) on shareholders by studying the lobbying behavior of investors and corporate insiders in order to affect the final implemented rules under SOX. Investors lobbied overwhelmingly in favor of strict implementation of SOX, while corporate insiders and business groups lobbied against strict implementation. We identify firms most affected by the law as those whose insiders lobbied against strict implementation. Such firms appear to be characterized by agency problems, rather than motivated by concerns over compliance costs. Cumulative stock returns during the five and a half months leading up to SOX passage were approximately 7% higher for corporations whose insiders lobbied against SOX disclosure-related provisions than for similar non-lobbying firms, consistent with an expectation that SOX would reduce agency problems. Analysis of returns in the post-passage implementation period suggests that investors’ positive expectations with regards to the effects of these provisions were warranted.

ABSTRACT: We test a catering theory describing how stock market mispricing might influence individual firms’ investment decisions. We use discretionary accruals as our proxy for mispricing. We find a positive relation between abnormal investment and discretionary accruals; that abnormal investment is more sensitive to discretionary accruals for firms with higher R&D intensity (opaque firms) or share turnover (firms with shorter shareholder horizons); that firms with high abnormal investment subsequently have low stock returns; and that the larger the relative price premium, the stronger the abnormal return predictability. We show that patterns in abnormal returns are stronger for firms with higher R&D intensity or share turnover.

ABSTRACT: We study the effect that a general lack of trust can have on stock market participation. In deciding whether to buy stocks, investors factor in the risk of being cheated. The perception of this risk is a function not only of the objective characteristics of the stocks, but also of the subjective characteristics of the investor. Less trusting individuals are less likely to buy stock and, conditional on buying stock, they will buy less. We find evidence consistent with these propositions in Dutch and Italian micro data, as well as in cross country data. All the evidence suggests that lack of trust could be an important factor in explaining the limited participation puzzle, especially among more wealthy investors.

ABSTRACT: Analysis of PISA results suggests that the gender gap in math scores disappears in countries with a more gender-equal culture.

ABSTRACT: To explain the extremely long-term persistence (more than 500 years) of positive historical experiences of cooperation (Putnam 1993), we model the intergenerational transmission of priors about the trustworthiness of others. We show that this transmission tends to be biased toward excessively conservative priors. As a result, societies can be trapped in a low-trust equilibrium. In this context, a temporary shock to the return to trusting can have a permanent effect on the level of trust. We validate the model by testing its predictions on the World Values Survey data and the German Socio Economic Panel. We also present some anecdotal evidence that these priors are reflected in novels that originate in different parts of the country.

ABSTRACT: Economists have been reluctant to rely on culture as a possible determinant of economic phenomena. The notion of culture is so broad and the channels through which it can enter the economic discourse so vague that it is difficult to design testable hypotheses. In this paper we show this does need to be the case. We introduce a narrower definition of culture that allows for a simple methodology to develop and test cultural-based explanations. We also present several applications of this methodology: from the choice to become entrepreneur to that of how much to save, to end with the political decision on income redistribution.

ABSTRACT: We study the effects of differences in local financial development within an integrated financial market. To do so, we construct a new indicator of financial development by estimating a regional effect on the probability that, ceteris paribus, a household is shut off from the credit market. By using this indicator we find that financial development enhances the probability an individual starts his own business, favors entry, increases competition, and promotes growth of firms. As predicted by theory, these effects are weaker for larger firms, which can more easily raise funds outside of the local area. Overall, the results suggest local financial development is an important determinant of the economic success of an area even in an environment where there are no frictions to capital movements.

ABSTRACT: To identify the effect of social capital on financial development, we exploit the well-known differences in social capital (Banfield (1958), Putnam (1993)) across different parts of Italy. In areas of the country with high levels of social capital, households invest less in cash and more in stock, use more checks, have higher access to institutional credit, and make less use of informal credit. The effect of social capital is stronger where legal enforcement is weaker and among less-educated people. These results are not driven by omitted environmental variables, since we show that the behavior of movers is still affected by the level of social capital present in the province where they were born.

ABSTRACT: This paper uses information on individual loan contracts to study the effects of government ownership on bank lending behavior. State-owned banks charge lower interest rates than do privately owned banks to similar or identical firms, even if firms are able to borrow more from privately owned banks. State-owned banks mostly favor large firms and firms located in depressed areas. The lending behavior of state-owned banks is affected by the electoral results of the party affiliated with the bank: the stronger the political party in the area where the firm is borrowing, the lower the interest rates charged.

ABSTRACT: Since Max Weber, there has been an active debate on the impact of religion on people’s economic attitudes. Much of the existing evidence, however, is based on cross-country studies in which this impact is confounded by differences in other institutional factors. We use the World Values Surveys to identify the relationship between intensity of religious beliefs and economic attitudes, controlling for country fixed effects. We study several economic attitudes toward cooperation, the government, working women, legal rules, thriftiness, and the market economy. We also distinguish across religious denominations, differentiating on whether a religion is dominant in a country. We find that on average, religious beliefs are associated with "good" economic attitudes, where "good" is defined as conducive to higher per capita income and growth. Yet religious people tend to be more racist and less favorable with respect to working women. These effects differ across religious denominations. Overall, we find that Christian religions are more positively associated with attitudes conducive to economic growth.

ABSTRACT: This paper studies the effects of banking mergers on individual loan borrowers. Using information on individual loan contracts between banks and companies, I analyze the consequences of banking consolidation on banks’ credit policies. I find that (i) in-market mergers are beneficial to borrowers if these mergers involve the acquisition of banks with small market shares. In these cases, interest rates charged by the consolidated banks decrease, consistently with the view that horizontal mergers generate efficiency gains. However, as the local market share of the acquired bank increases, the efficiency effect is offset by market power; (ii) mergers have different distributional effects across borrowers of different sizes; (iii) small borrowers of target banks are less likely to borrow in the future from the consolidated bank than borrowers of similar banks not involved in mergers. The decision to deny credit to small borrowers does not seem to be based on the quality of the borrower, confirming potential adverse welfare effects of the banking consolidation on the availability of credit to small businesses.

ABSTRACT: This chapter reviews the recent debate about the role of social capital in economics. We argue that all the difficulties this concept has encountered in economics are due to a vague and excessively broad definition. For this reason, we restrict social capital to the set of values and beliefs that help cooperation—which for clarity we label civic capital. We argue that this definition differentiates social capital from human capital and satisfies the properties of the standard notion of capital. We then argue that civic capital can explain why differences in economic performance persist over centuries and discuss how the effect of civic capital can be distinguished empirically from other variables that affect economic performance and its persistence, including institutions and geography.

We conjecture that the changes in economic activity from late 2008 to early 2009 is due to a drop in trust. We present new survey evidence consistent with this hypothesis.

ABSTRACT: This document describes the data analyzed in the Templeton-Chicago MBAs longitudinal study. The study is based on the entire 2008 generation of MBA students from Chicago University’s Graduate School of Business. The data described in this document are obtained from three different sources: surveys, laboratory experiments, and the GSB’s admission department. We give a brief overview of each data source, in addition to a detailed description of the data-collection procedures.

ABSTRACT: We show that a measure of reciprocity derived from the Berg et al. (1995) trust game in a laboratory setting predicts the reciprocal behavior of the same subjects in a real-world situation. By using the Crowne and Marlowe (1960) social desirability scale, we do not find any evidence that a desire to conform to social norms distorts results in the lab, yet we do find evidence that it affects results in the field.

ABSTRACT: We use exogenous variation in the degree of restrictions to bank competition across Italian provinces to study both the effects of bank regulation and the impact of deregulation. We find that where entry was more restricted the cost of credit was higher and - contrary to expectations- access to credit lower. The only benefit of these restrictions was a lower proportion of bad loans. Liberalization brings a reduction in rate spreads and an increased access to credit at the cost of an increase in bad loans. In provinces where restrictions to bank competition were most severe, the proportion of bad loans after deregulation raises above the level present in more competitive markets, suggesting that the pre-existing conditions severely impact the effect of liberalizations.