The intergenerational transmission of cognitive skills: an investigation of the causal impact of families on student outcomes

The extensive literature on intergenerational mobility highlights the importance of family linkages but fails to provide credible evidence about the underlying family factors that drive the pervasive correlations. We employ a unique combination of Dutch survey and registry data that links math and language skills across generations. We identify a causal connection between cognitive skills of parents and their children by exploiting within-family between-subject variation in these skills. The data also permit novel IV estimation that isolates variation in parental cognitive skills due to school and peer quality. The between-subject and IV estimates of the key intergenerational persistence par..

Neuroeconomics

How Do Acquisitions Affect the Mental Health of Employees?

Using employer-employee level data linked to individual health records, we document that the incidence of stress, anxiety, depression, psychiatric medication usage, and even suicide increase following acquisitions. These effects are prevalent among employees from both targets and acquirers, in weak as well as in growing, profitable firms. Employees who experience negative career developments within the merging firms, ’blue-collar’ workers, and employees with lower cognitive and non-cognitive skills are most affected. A variety of tests address endogeneity concerns, including an analysis exploiting failed mergers. Our findings point to mental illness as a significant non-pecuniary cost of..

Neuroeconomics

Child Development in the Early Years: Parental Investment and the Changing Dynamics of Different Domains

This paper uses the data on child development collected around the evaluation of a nursery program to estimate the details of the process of human development. We model development as made of three latent factors, reflecting health, cognitive and socio-emotional skills. We observe children from age 1 to age 7. We assume that, at each age, these factors interact among themselves and with a variety of other inputs to determine the level of development at following ages. The richness of the data we use allows us to: (i) let the dynamics be rich and flexible; (ii) let each factors play a role in the production of any other factor; (iii) estimate age-specific functional forms; (iv) treat parental..

Neuroeconomics

Gambits: Theory and Evidence

Gambits are central to human decision making. Our goal is to provide a theory of Gambits. A Gambit is a combination of psychological and technical factors designed to disrupt predictable play. Chess provides an environment to study Gambits and behavioral economics. Our theory is based on the Bellman optimality path for sequential decision making. This allows us to calculate the Q values of a Gambit where material (usually a pawn) is sacrificed for dynamic play. On the empirical side, we study the effectiveness of a number of popular chess Gambits. This is a natural setting as chess Gambits require a sequential assessment of a set of moves (a.k.a. policy) after the Gambit has been accepted. O..

Neuroeconomics

The Cost of Worrying About an Epidemic: Ebola Concern and Cognitive Function in the US

Do emotional responses to the spread of an infectious disease affect the quality of economic decision-making? In the context of an episode of heightened public concern about Ebola in the US in October 2014, I document that worrying about the possibility of an epidemic can impair cognitive function. My analysis relies on data from cognitive tests administered as part of a wave of survey interviews by a large US panel study, which I combine with measures of local concern about Ebola based on internet search volume. For identification, I exploit temporal and spatial variation in Ebola concern caused by the emergence of four cases of Ebola that were diagnosed in the US. Using proximity to the US..

Neuroeconomics

Attention Overload

We introduce an Attention Overload Model that captures the idea that alternatives compete for the decision maker's attention, and hence the attention frequency each alternative receives decreases as the choice problem becomes larger. Using this nonparametric restriction on the random attention formation, we show that a fruitful revealed preference theory can be developed, and provide testable implications on the observed choice behavior that can be used to partially identify the decision maker's preference. Furthermore, we provide novel partial identification results on the underlying attention frequency, thereby offering the first nonparametric identification result of (a feature of) the ra..

Neuroeconomics

Mental Health Therapy as a Core Strategy for Increasing Human Capital: Evidence from Ghana

We study the impact of cognitive behavioral therapy (CBT) for individuals selected from the general population of poor households in rural Ghana. Results from 2-3 months after a randomized intervention show strong impacts on mental and physical health, cognitive and socioemotional skills, and downstream economic outcomes. We find no evidence of heterogeneity by baseline mental distress; we argue that this is because CBT can improve human capital for a general population of poor individuals through two pathways. First, CBT reduces vulnerability to deteriorating mental health; and second, CBT directly improves bandwidth, increasing cognitive and socioemotional skills and hence economic outcome..

Neuroeconomics

Socioemotional Skills and Refugees’ Language Acquisition

This paper contributes to the existing literature by extending Chiswick and Miller’s (2001) model to include socioemotional skills. While the theoretical model predicts that exposure, efficiency, and incentives determine language proficiency, we additionally assume that socioemotional skills influence these three constructs and thereby language proficiency. Specifically, we seek to answer the following research questions: How do socioemotional skills affect the language attainment of recent refugees? What is the relative importance of socioemotional skills in refugees’ language learning process? Given the findings of the prior literature that personality traits may compensate f..

Neuroeconomics

Intelligence promotes cooperation in long-term interaction: Experimental evidence in infinitely repeated public goods games

A growing body of literature in experimental economics examines how cognitive ability affects cooperation in social dilemma settings. We contribute to the existing literature by studying this relationship in a more complex and strategic environment when the number of partners increases in an infinitely repeated public goods game. We designed four treatments with different continuation probability under two conditions: whether cooperation can be sustained as risk dominance or not. We asked participants to decide whether to cooperate in every period in the first five rounds. They were further asked to decide if they should elicit their strategy at the beginning of each super game using the str..

Neuroeconomics

Maternal Age and Infant Health

We study the effects of maternal age on infant health. Age at birth has been increasing for the past several decades in many countries, and correlations show that health at birth is worse for children born to older mothers. In order to identify causal effects, we exploit school entry cutoffs and the empirical finding that women who are older for their cohort in school tend to give birth later. In Spain, children born in December start school a year earlier than those born the following January, despite being essentially the same age. We show that as a result, January‐born women finish school later and are (several months) older when they marry and when they have their first child. We find ..

Neuroeconomics

A Bit of Salt, A Trace of Life: Gender Norms and The Impact of a Salt Iodization Program on Human Capital Formation of School Aged Children

This paper examines the effects of a massive salt iodization program on human capital formation of school-aged children in China. Exploiting province and time variation, we find a strong positive impact on cognition for girls and no effects for boys. For non-cognitive skills, we find the opposite. We show in a simple model of parental investment that gender preferences can explain our findings. Analyses exploiting within the province, village-level variation in gender attitudes confirm the importance of parental gender preferences. Consequently, large scale programs can have positive (and possibly) unintended effects on gender equality in societies with son preference.

Neuroeconomics

Reaping the Rewards Later: How Education Improves Old-Age Cognition in South Africa

Cognitive abilities are fundamental for decision-making, and understanding the causes of human capital depreciation in old age is especially important in an aging society. Using a longitudinal labor survey that collects direct proxy measures of cognitive skills, we study the effect of educational attainment on cognitive performance in late adulthood in South Africa. We find robust evidence that an increase in a year of schooling improves memory performance and general cognition. We also find evidence of heterogeneous effects of educational attainment on cognitive performance. We explore the mechanisms through which education can affect cognitive performance. We show that a more supportive so..

Neuroeconomics

Early Childhood Human Capital Formation at Scale

Can governments leverage existing service-delivery platforms to scale early childhood development (ECD) programs? We experimentally study a large-scale home-visiting intervention providing materials and counseling -integrated into Bangladesh's national nutrition program without extra financial incentives for the service providers (SPs). We find SPs partially substituted away from nutritional to ECD counseling. Intent-to-treat estimates show the program improved child's cognitive (0.17 SD), language (0.23 SD), and socio-emotional developments (0.12-0.14 SD). Wasting and underweight rates also declined. Improved maternal agency, complementary parental investments, and higher take-up of the pre..

Neuroeconomics

Maternal depression and child human capital: A genetic instrumental-variable approach

We here address the causal relationship between maternal depression and child human capital using UK cohort data. We exploit the conditionally-exogenous variation in mothers’ genomes in an instrumental-variable approach, and describe the conditions under which mother’s genetic variants can be used as valid instruments. An additional episode of maternal depression between the child’s birth up to age nine reduces both their cognitive and non-cognitive skills by 20 to 45% of a SD throughout adolescence. Our results are robust to a battery of sensitivity tests addressing, among others, concerns about pleiotropy and the maternal transmission of genes to her child.

Neuroeconomics

Reaping the Rewards Later: How Education Improves Old-Age Cognition in South Africa

Cognitive abilities are fundamental for decision-making, and understanding the causes of human capital depreciation in old age is especially important in an aging society. Using a longitudinal labor survey that collects direct proxy measures of cognitive skills, we study the effect of educational attainment on cognitive performance in late adulthood in South Africa. We find robust evidence that an increase in a year of schooling improves memory performance and general cognition. We also find evidence of heterogeneous effects of educational attainment on cognitive performance. We explore the mechanisms through which education can affect cognitive performance. We show that a more supportive so..

Neuroeconomics

Cognitive skills, strategic sophistication, and life outcomes

Classification-

Neuroeconomics

Overinference from Weak Signals, Underinference from Strong Signals, and the Psychophysics of Interpreting Information

Numerous experiments have found that when people receive signals that would lead a Bayesian to substantially revise beliefs, they underinfer. This paper experimentally considers inference from a wider range of signal strengths and finds that subjects overinfer when signals are sufficiently weak. A model of cognitive imprecision adapted to study misperceptions about signal strength explains the data well. As the theory predicts, subjects with more experience, greater cognitive sophistication, and lower variance in answers, infer less from weak signals and infer more from strong signals. The results also relate misperceptions to demand for information and inference from multiple signals.

Neuroeconomics

Inequality in Early Care Experienced by U.S. Children

Using every major nationally-representative dataset on parental and non-parental care provided to children up to age 6, we quantify differences in American children’s care experiences by socioeconomic status (SES), proxied primarily with maternal education. Increasingly, higher-SES children spend less time with their parents and more time in the care of others. Non-parental care for high-SES children is more likely to be in childcare centers, where average quality is higher, and less likely to be provided by relatives where average quality is lower. Even within types of childcare, higher-SES children tend to receive care of higher measured quality and higher cost. Inequality is evident at ..

Neuroeconomics

Salience

We review the fast-growing work on salience and economic behavior. Psychological research shows that salient stimuli attract human attention “bottom up” due to their high contrast with surroundings, their surprising nature relative to recalled experiences, or their prominence. The Bordalo, Gennaioli and Shleifer (2012, 2013, 2020) models of salience show how bottom up attention can distort economic choice by distracting decision makers from their immediate goals or from certain choice attributes. We show that this approach explains many puzzles: separately treated departures from “rationality” such as probability weighting, menu effects, reference point effects, and framing, emerge a..

Neuroeconomics

Intergenerational educational mobility – the role of non-cognitive skills

While it has been shown that university attendance is strongly predicted by parental education, we know very little about why some potential ‘first in family’ or first-generation students make it to university and others do not. This paper looks at the role of non-cognitive skills in the university participation of this disadvantaged group in England. We find that conditional on national, high-stakes exam scores and various measures of socioeconomic background, having higher levels of non-cognitive skills, specifically locus of control, academic self-concept, work ethic, and self-esteem, in adolescence is positively related to intergenerational educational mobility to university. Our res..

Neuroeconomics

Labor Market Returns and the Evolution of Cognitive Skills: Theory and Evidence

A large literature in cognitive science studies the puzzling “Flynn effect” of rising fluid intelligence (reasoning skill) in rich countries. We develop an economic model in which a cohort’s mix of skills is determined by different skills’ relative returns in the labor market and by the technology for producing skills. We estimate the model using administrative data from Sweden. Combining data from exams taken at military enlistment with earnings records from the tax register, we document an increase in the relative labor market return to logical reasoning skill as compared to vocabulary knowledge. The estimated model implies that changes in labor market returns explain 36 percent of..

Neuroeconomics

Bayesian Mindsponge Framework

Bayesian Mindsponge Framework (BMF, also known as Bayesian Mindsponge analytical approach) is an analytical approach that employs the mindsponge information-processing mechanism and Bayesian analysis (e.g. bayesvl package) as each other’s complement to conduct cognitive and psychological research.

Neuroeconomics

Parents' Nonstandard Work Schedules and Adolescent Social and Emotional Wellbeing

Increasing evidence shows that parents’ work schedules in evenings/nights have a negative impact on children's physical and mental health. Few studies examine adolescents and joint parental work schedules. We investigate the association between joint parental work schedules and adolescent mental health and test parental time spent with adolescents and parenting style as potential mediators. We analysed one wave of the Raine Study data, focusing on adolescents who were followed up at ages 16-17 and lived in dual-earner households (N=607). Adolescent mental health is measured in the Child Behavioural Checklist (morbidity, internalising behaviour, externalising behaviour, anxiety/depression)...

Neuroeconomics

Why North Korean Refugees are Reluctant to Compete: The Roles of Cognitive Ability

This paper investigates the development of competitiveness by comparing three Korean groups in South Korea, born and raised in three countries with distinct institutional environments: South Korea, North Korea, and China. Results based on laboratory experiments show that North Korean refugees are significantly less competitive than South Koreans or Korean-Chinese immigrants. Furthermore, analyses through the lens of a choice model with probability weighting suggest that lower cognitive ability may be associated with lower levels of expected performance, more pessimistic subject beliefs and greater aversion to competition.

Neuroeconomics

Labor Market Returns and the Evolution of Cognitive Skills: Theory and Evidence

A large literature in cognitive science studies the puzzling "Flynn effect" of rising fluid intelligence (reasoning skill) in rich countries. We develop an economic model in which a cohort's mix of skills is determined by different skills' relative returns in the labor market and by the technology for producing skills. We estimate the model using administrative data from Sweden. Combining data from exams taken at military enlistment with earnings records from the tax register, we document an increase in the relative labor market return to logical reasoning skill as compared to vocabulary knowledge. The estimated model implies that changes in labor market returns explain 36 percent of the mea..

Neuroeconomics

Impacts of Double-Fortified Salt on Anemia and Cognition: Four-Year Follow-up Evidence from a School-Based Nutrition Intervention in India

Long-term follow-up of early childhood health interventions is important for human capital accumulation. We provide experimental evidence on child health and human capital outcomes from the longer-term follow-up of a school-based nutrition intervention in India. Using panel data, we examine the effectiveness of the use of iron and iodine fortified salt in school lunches to reduce anemia among school children. After four years of treatment, treated children, on average, have higher hemoglobin levels and a lower likelihood of anemia relative to the control group. Interestingly, the intervention did not have any impact on cognitive and educational outcomes.

Neuroeconomics

A decision-making model with anticipation of surprise for explaining irrational economic behaviors

Many experimental observations have shown that the expected utility theory is violated when people make decisions under risk. Here, we present a decision-making model inspired by the prediction of error signals reported in the brain. In the model, we choose the expected value across all outcomes of an action to be a reference point which people use to gauge the value of different outcomes. Action is chosen based on a nonlinear average of anticipated surprise, defined by the difference between individual outcomes and the abovementioned reference point. The model does not depend on non-linear weighting of the probabilities of outcomes. It is also straightforward to extend the model to multi-st..

Neuroeconomics

The Australian Twins Economic Preferences Survey

This paper describes the Australian Twins Economic Preferences Survey (ATEPS). The dataset comprises a wide variety of preference and behavioral measures (risk aversion, impatience, ambiguity aversion, trust, confidence) elicited using incentivised decision tasks. 1,120 Australian adult twins (560 pairs) completed the survey, making it one of the largest datasets containing incentivised preference measures of twins. As the survey was conducted during the COVID-19 pandemic, we also collected information on experiences related to the pandemic, along with a variety of questions on political attitudes and mental wellbeing. We hope that ATEPS can make a valuable contribution to social science and..

Neuroeconomics

The Predictive Role of Caregiver’s Language in Child Development Outcomes in Rural China

Neuroeconomics

Limited Self-knowledge and Survey Response Behavior

We study response behavior in surveys and show how the explanatory power of self-reports can be improved. First, we develop a choice model of survey response behavior under the assumption that the respondent has imperfect self-knowledge about her individual characteristics. In panel data, the model predicts that the variance in responses for different characteristics increases in self-knowledge and that the variance for a given characteristic over time is non-monotonic in self-knowledge. Importantly, the ratio of these variances identifies an individual's level of self-knowledge, i.e. the latter can be inferred from observed response patterns. Second, we develop a consistent and unbiased est..

Neuroeconomics