Both economists and psychologists have studied the concept of risk preference. Economists categorize individuals as more or less risk-tolerant based on the marginal utility of income. Psychologists categorize individuals' propensity towards risk based on harm avoidance, novelty seeking and reward dependence traits. The two concepts of risk are related, although the instruments used for empirical measurement are quite different. Psychologists have found risk preference to be an important determinant of alcohol consumption; however economists have not included risk preference in studies of alcohol demand. This is the first study to examine the effect of risk preference on alcohol consumption in the context of a demand function. The specifications employ multiple waves from the Panel Study of Income Dynamics (PSID) and the Health and Retirement Study (HRS), which permit the estimation of age-specific models based on nationally representative samples. Both of these data sets include a unique and consistent survey instrument designed to directly measure risk preference in accordance with the economist's definition. This study estimates the direct impact of risk preference on alcohol demand and also explores how risk preference affects the price elasticity of demand. The empirical results indicate that risk preference has a significant negative effect on alcohol consumption, with the prevalence and consumption among risk-tolerant individuals being 6-8% higher. Furthermore, the tax elasticity is similar across both risk-averse and risk-tolerant individuals. This suggests that tax policies are as equally effective in deterring alcohol consumption among those who have a higher versus a lower propensity for alcohol use.
The endowment effect is the finding that possession of an item adds to its value. We introduce a new procedure for testing this effect: participants are divided into two groups. Possession group participants inspect a numbered lottery ticket and know it is theirs, while inspection group participants only inspect a lottery ticket without being endowed with it. Subsequently participants choose between playing the lottery with this (possessed or inspected) ticket, or exchanging it for another one. Our procedure tests for the effect of endowment while controlling for the influence of transaction costs as well as for inspection effects and the influence of bargaining roles (buyer vs. seller), which often afflict experimentation with the endowment effect. In a real setting, tickets in possession were valued significantly higher than inspected tickets. Contrary to some findings in the literature participants also correctly predicted these valuation differences in a hypothetical situation, both for themselves as well as for others. Furthermore, our results suggest that regret rather than loss aversion may be the source of the endowment effect in an experimental setting using lottery tickets. Applying our procedure to a setting employing riskless objects in form of mugs revealed rather ambiguous results, thus emphasizing that the role of regret might be less prominent in non-lottery settings.
Surveys on tax compliance and non-compliance often rely on ad hoc formulated items which lack standardization and empirical validation. We present an inventory to assess tax compliance and distinguish between different forms of compliance and non-compliance: voluntary versus enforced compliance, tax avoidance, and tax evasion. First, items to measure voluntary and enforced compliance, avoidance, and evasion were drawn up (collected from past research and newly developed), and tested empirically with the aim of producing four validated scales with a clear factorial structure. Second, findings from the first analyses were replicated and extended to validation on the basis of motivational postures. A standardized inventory is provided which can be used in surveys in order to collect data which are comparable across research focusing on self-reports. The inventory can be used in either of two ways: either in its entirety, or by applying the single scales independently, allowing an economical and fast assessment of different facets of tax compliance.
Information campaigns to increase tax compliance could be framed in different ways. They can either highlight the potential gains when tax compliance is high, or the potential losses when compliance is low. According to regulatory focus theory, such framing should be most effective when it is congruent with the promotion or prevention focus of its recipients. Two studies confirmed the hypothesized interaction effects between recipients' regulatory focus and framing of information campaigns, with tax compliance being highest under conditions of regulatory fit. To address taxpayers effectively, information campaigns by tax authorities should consider the positive and negative framing of information, and the moderating effect of recipients' regulatory focus.
Our research tested two predictions regarding how likelihood can have motivational effects as a function of how a probability is expressed. We predicted that describing the probability of a future event that could be either A or B using the language of high likelihood ("80% A") rather than low likelihood ("20% B"), i.e., high rather than low expressed likelihood, would make a present activity more real and engaging, as long as the future event had properties relevant to the present activity. We also predicted that strengthening engagement from the high (vs. low) expressed likelihood of a future event would intensify the value of present positive and negative objects (in opposite directions). Both predictions were supported. There was also evidence that this intensification effect from expressed likelihood was independent of the actual probability or valence of the future event. What mattered was whether high versus low likelihood language was used to describe the future event.
In most Western countries couples can decide for themselves how many children they want to have and when they want to have them. This means that family size is a choice variable. In this paper we argue that this choice variable plays an important role in economic models. A couple may rationally determine the optimal number of children it wishes to have, but this choice can only be based on expectations. Since children are usually born one by one, the optimal number may be adjusted during the process of total family formation, as a result of the experiences that the parents have with their first children. The timing of the births can result from a rational decision process. However, deviations from this optimal pattern may be caused by a high subjective time preference.
"On the basis of the existing literature we examined the points at which social security and family demography meet. The main conclusions are: (1) child allowances will only affect fertility if the level of benefit is rather substantial; (2) unemployment provisions may affect fertility; (3) remarriage frequency is probably affected by public assistance benefits; (4) the same possibly holds for the divorce frequency. These conclusions are tentative: the results are contradictory from many viewpoints, some fields have hardly been investigated and it is unclear whether the effects are temporary or lasting." The geographical focus is on developed countries.
This paper examines the association between John Henryism - a behavioral predisposition to cope actively with psychosocial environmental stressors - and happiness. On the basis of previous research on aspiration and goal regulation, we predicted that John Henryism would be negatively associated with happiness when controlling for demographic factors and attainment in various domains of life. We tested the prediction in a sample of hypertensive participants (n=758) drawn from an inner-city, mainly African-American, safety-net hospital in Jefferson County, Alabama. Bivariate analysis revealed no association between John Henryism and attainment in six domains of life: marriage, children, education, employment, income, and health. However, a significant negative association between John Henryism and happiness was found both in bivariate analysis (Spearman's ρ= -0.335; p<.001) and when controlling for demographic factors and attainment using ordinal logistic regression analysis. There was a significant interaction effect between John Henryism and gender: being male was positively associated with happiness among participants with low John Henryism, but negatively associated with happiness among participants with high John Henryism. While further study would be required in order to establish the extent to which these findings can be generalized as well as their causal underpinnings, the results indicate that John Henryism is negatively associated with happiness, especially among men, and underscore the limitations of using self-reported measures of happiness as proxies for well-being for purposes of public policy.
"Motives for migration should play a major role in the development of achievement motivation of migrants, which, in turn, should influence economic success. For a sample of guest-workers in Austria it is shown that the simple distinction of economic and non-economic, i.e. family or political motives, does not yield convincing results for the explanation of wages. Economic motivation has to be further differentiated into ¿search for success' and ¿fear of failure' types. Immigrants with optimistic economic motivation are able to command wages more than 10% higher than individuals migrating for political reasons."
Turkish monetary reform, which took effect in January 2005, introduced the New Turkish Lira (NTL) by deleting six zeros from the former currency, the Turkish Lira (TL). Two experiments investigated how the introduction of the NTL might affect price estimation. In the first, conducted in December 2004, 202 students were first presented with high or low anchor values and then estimated the average price of a “new Turkish mid-sized car” in different currencies (TL, NTL and Euro). Although anchoring bias was not significantly different across familiar (TL) and unfamiliar currencies (NTL and Euro), price estimates in Euro and NTL were significantly higher than those in TL. In the second experiment, carried out 6 months later, 212 adult consumers estimated the prices of 13 items in one of three currencies. For five items prices estimated in Euros were significantly higher than those expressed in either TL or NTL. However, there were no significant differences between TL and NTL, suggesting that Turkish consumers had quickly adapted. Such ease of adaptation is consistent with a rescaling hypothesis: when one or more zeros are dropped from a currency, consumers rescale all prices relatively quickly rather than relearn them selectively through gradual exposure.