Contributions published at Department of Economics (Florian Scheuer)

Did the dramatic learning losses from remote learning in the context of COVID-19 stem at least partly from schools having overlooked students’ socio-emotional skills – such as their ability to self-regulate emotions, their mental models, motivation, and grit – during the emergency transition to remote learning? We study this question using a cluster-randomized control trial with 18, 256 high-school students across 87 schools in the State of Goiás, Brazil. The intervention sent behavioral nudges through text messages to students or their caregivers, targeting their socio-emotional skills during remote learning. Here we show that these messages significantly increased standardized test scores relative to the control group, preventing 7.5% of learning losses in math and 24% in Portuguese, consistent with the hypothesis that neglecting students’ socio-emotional skills magnified learning losses during the pandemic.

Humans form impressions toward individuals of their own social groups (ingroup members) and of different social groups (outgroup members). Outgroup-focused theories predict that intergroup impressions are mainly shaped by experiences with outgroup individuals, while ingroup-focused theories predict that ingroup experiences play a dominant role. Here we test predictions from these two psychological theories by estimating how intergroup impressions are dynamically shaped when people learn from both ingroup and outgroup experiences. While undergoing fMRI, male participants had identical experiences with different ingroup or outgroup members and rated their social closeness and impressions toward the ingroup and the outgroup. Behavioral results showed an initial ingroup bias in impression ratings which was significantly reduced over the course of learning, with larger effects in individuals with stronger ingroup identification. Computational learning models revealed that these changes in intergroup impressions were predicted by the weight given to ingroup prediction errors. Neurally, the individual weight for ingroup prediction errors was related to the coupling between the left inferior parietal lobule and the left anterior insula, which, in turn, predicted learning-related changes in intergroup impressions. Our findings provide computational and neural evidence for ingroup-focused theories, highlighting the importance of ingroup experiences in shaping social impressions in intergroup settings.

We study optimal employment contracts for present-biased employees if firms cannot commit to long-term contracts. Assuming that an employee's effort increases his chances to obtain a future benefit, we show that individuals who are naive about their present bias will actually be better off than sophisticated or time-consistent individuals. Moreover, firms might benefit from being ignorant about the extent of an employee's naiveté. Our results also indicate that naive employees might be harmed by policies such as employment protection or a minimum wage, whereas sophisticated employees are better off.

In a controlled laboratory experiment we investigate whether time pressure influences voting decisions, and in particular the degree of strategic (insincere) voting. We find that participants under time constraints are more sincere when using the widelyemployed Plurality Voting method. That is, time pressure might reduce strategic voting and hence misrepresentation of preferences. However, there are no effects for Approval Voting, in line with arguments that this method provides no incentives for strategic voting.

We study how parents transmit patience to their children with a focus on two theoretically important channels of socialization: parenting values and parental involvement. Using high-quality administrative and survey data, and a setting without reverse causality concerns, we document a substantial intergenerational transmission of patience. We show that parenting values represent a key channel of the transmission. Authoritative parents (high in control and warmth) do not transmit patience to their children, in contrast to authoritarian and permissive parents. Thus, the authoritative parenting style seems to counteract the transmission of impatience. While parental involvement does not appear to be a relevant channel at the aggregate level, we document important heterogeneity by parent gender.

We present the family of Excess Payoff Dynamics for normal-form games, where the growth of a strategy depends only on its current proportion and the excess payoff, i.e., the payoff advantage of the strategy over the average population payoff. Requiring dependence only on the own excess payoff and a natural sign-preserving condition, the class essentially reduces to aggregate monotonic dynamics, a functional generalization of the Replicator Dynamics. However, Excess Payoff Dynamics also include a different subclass which contains the Replicator Dynamics, the Brown-von Neumann-Nash Dynamics, and other interesting examples as, e.g., satisficing dynamics. We also clarify the relation to excess demand dynamics from microeconomics.

Does growing up with a sister rather than a brother affect personality? In this article, we provide a comprehensive analysis of the effects of siblings’ gender on adults’ personality, using data from 85,887 people from 12 large representative surveys covering nine countries (United States, United Kingdom, The Netherlands, Germany, Switzerland, Australia, Mexico, China, and Indonesia). We investigated the personality traits of risk tolerance, trust, patience, locus of control, and the Big Five. We found no meaningful causal effects of the gender of the next younger sibling and no associations with the gender of the next older sibling. Given the high statistical power and consistent results in the overall sample and relevant subsamples, our results suggest that siblings’ gender does not systematically affect personality.

Leadership theories in sociology and psychology argue that effective leaders influence follower behavior not only through the design of incentives and institutions, but also through personal abilities to persuade and motivate. Although charismatic leadership has received considerable attention in the management literature, existing research has not yet established causal evidence for an effect of leader charisma on follower performance in incentivized and economically relevant situations. We report evidence from field and laboratory experiments that investigate whether a leader’s charisma—in the form of a stylistically different motivational speech—can induce individuals to undertake personally costly but socially beneficial actions. In the field experiment, we find that workers who are given a charismatic speech increase their output by about 17% relative to workers who listen to a standard speech. This effect is statistically significant and comparable in size to the positive effect of high-powered financial incentives. We then investigate the effect of charisma in a series of laboratory experiments in which subjects are exposed to motivational speeches before playing a repeated public goods game. Our results reveal that a higher number of charismatic elements in the speech can increase public good contributions by up to 19%. However, we also find that the effectiveness of charisma varies and appears to depend on the social context in which the speech is delivered.

Transaction costs are omnipresent in markets yet are often omitted in economic models. We show that their presence can fundamentally alter incentives and welfare in markets in which the price equates supply and demand. We categorize transaction costs into two types. Asymptotically uninfluenceable transaction costs—such as fixed and price fees—preserve the key asymptotic properties of markets without transaction costs, namely strategyproofness, efficiency, and robustness to misspecified beliefs and to aggregate uncertainty. In contrast, influenceable transaction costs—such as spread fees—lead to complex strategic behavior (which we call price guessing) and may result in severe market failure. In our analysis of optimal design we focus on transaction costs that are fees collected by a platform as revenue. We show how optimal design depends on the traders’ beliefs. In particular, with common prior beliefs, any asymptotically uninfluenceable fee schedule can be scaled to be optimal, while purely influenceable fee schedules lead to zero revenue. Our insights extend beyond markets equalizing demand and supply.

There is an active policy debate seeking to understand whether Amazon first-party entry in competition with third-party merchants harms these merchants, and ultimately consumers, on Amazon Marketplace. Some argue that the exploitation of third-party data permits seller expropriation and reduces innovation while others claim that such entry permits the internalization of important externalities, benefiting consumers and merchants alike. We seek to inform this debate by measuring the predictors and effects of Amazon first-party retail entry on consumer and third-party merchant outcomes in the Home & Kitchen department of Germany’s Marketplace between 2016 and 2021. We find Amazon entry both within and across products is associated with modest positive effects on both consumer and third-party merchant outcomes more consistent with mild market expansion than with appropriating third-party sales. We find that both Amazon and large third-party merchants’ entry is associated with fewer subsequent new product introductions, but that these are consistent with regression to the mean rather than causal effects on innovation. Finally, we find that the predictors of Amazon’s within-product entry decisions are more consistent with a strategy that makes Marketplace more attractive to consumers than of third-party seller expropriation, including consideration of predictors based on aggregated Marketplace data. While the empirical setting presented challenges for estimating causal effects, our results are broadly inconsistent with systematic adverse effects of Amazon entry on Amazon Marketplace.

Children’s self-regulation abilities are key predictors of educational success and other life outcomes such as income and health. However, self-regulation is not a school subject, and knowledge about how to generate lasting improvements in self-regulation and academic achievements with easily scalable, low-cost interventions is still limited. Here, we report the results of a randomized controlled field study which integrates a short self-regulation teaching unit based on the concept of mental contrasting with implementation intentions into the school curriculum of first graders. We demonstrate that the treatment increases children’s skills in terms of impulse control and self-regulation while also generating lasting improvements in academic skills like reading and monitoring careless mistakes. Moreover, it has a substantial effect on children’s long-term school career by increasing the likelihood of enrolling in an advanced secondary school track three years later. Thus, self-regulation teaching can be integrated into the regular school curriculum at low cost, is easily scalable and can substantially improve important abilities and children’s educational career path.

Overwhelming evidence from the cognitive sciences shows that, in simple discrimination tasks (determining what is louder, longer, brighter, or even which number is larger) humans make more mistakes and decide more slowly when the stimuli are closer along the relevant scale. We investigate to what extent these effects are relevant for economic decisions in a setting where optimal choices are objectively known (and independent of attitudes toward risk). We find that, even for tasks with objectively-correct answers, error rates and response times increase gradually as expected values become closer. Differences in payoff-independent numerical magnitudes also play a role, which however only becomes clear when one accounts for expected values. We conclude that the gradual effects on choice found in cognitive discrimination paradigms are very much present in economic choices, and depend on economic as well as perceptual variables.

The transition to remote learning in the context of coronavirus disease 2019 (COVID-19) might have led to dramatic setbacks in education. Taking advantage of the fact that São Paulo State featured in-person classes for most of the first school quarter of 2020 but not thereafter, we estimate the effects of remote learning in secondary education using a differences-in-differences strategy that contrasts variation in students’ outcomes across different school quarters, before and during the pandemic. We also estimate intention-to-treat effects of reopening schools in the pandemic through a triple-differences strategy, contrasting changes in educational outcomes across municipalities and grades that resumed in-person classes or not over the last school quarter in 2020. We find that, under remote learning, dropout risk increased by 365% while test scores decreased by 0.32 s.d., as if students had only learned 27.5% of the in-person equivalent. Partially resuming in-person classes increased test scores by 20% relative to the control group.

The earnings of individuals depend on the demand for the factor services they supply. International trade may therefore affect earnings inequality because either (i) foreign consumers and firms demand domestic factor services in different proportions than domestic consumers and firms do, an export channel; or (ii) domestic consumers and firms change their demand for domestic factor services in response to the availability of foreign goods, an import channel. Building on this idea, we develop new measures of export and import exposure at the individual level and provide estimates of their incidence across the earnings distribution. The key input fed into our empirical analysis is a unique administrative data set from Ecuador that merges firm-to-firm transaction data, employer-employee matched data, owner-firm matched data, and firm-level customs transaction records. We find that export exposure is pro-middle class, import exposure is pro-rich, and in terms of overall incidence, the import channel is the dominant force. As a result, earnings inequality in Ecuador is higher than it would be in the absence of trade.

This paper constructs a new estimator for large covariance matrices by drawing a bridge between the classic (Stein (1975)) estimator in finite samples and recent progress under large-dimensional asymptotics. The estimator keeps the eigenvectors of the sample covariance matrix and applies shrinkage to the inverse sample eigenvalues. The corresponding formula is quadratic: it has two shrinkage targets weighted by quadratic functions of the concentration (that is, matrix dimension divided by sample size). The first target dominates mid-level concentrations and the second one higher levels. This extra degree of freedom enables us to outperform linear shrinkage when the optimal shrinkage is not linear, which is the general case. Both of our targets are based on what we term the “Stein shrinker”, a local attraction operator that pulls sample covariance matrix eigenvalues towards their nearest neighbors, but whose force diminishes with distance (like gravitation). We prove that no cubic or higher-order nonlinearities beat quadratic with respect to Frobenius loss under large-dimensional asymptotics. Non-normality and the case where the matrix dimension exceeds the sample size are accommodated. Monte Carlo simulations confirm state-of-the-art performance in terms of accuracy, speed, and scalability.

To understand students’ motives in obtaining postgraduate qualifications, we elicit intentions to pursue postgraduate education and beliefs about its returns in a sample of 1002 university students. We find large gaps in perceptions about the immediate and later-life benefits of postgraduate education, both between first- and continuing-generation students and within the latter group. Differences in student beliefs about returns can account for 70% of the socioeconomic gaps in intentions to pursue postgraduate studies. We document large differences in students’ current undergraduate experiences by socioeconomic background and find these to be predictive of perceived returns to postgraduate education.

Negative symptoms in the psychosis continuum are linked to impairments in reward processing and cognitive function. Processes at the interface of reward processing and cognition and their relation to negative symptoms remain little studied, despite evidence suggestive of integration in mechanisms and neural circuitry. Here, we investigated brain activation during reward-dependent modulation of working memory (WM) and their relationship to negative symptoms in subclinical and early stages of the psychosis continuum. We included 27 persons with high schizotypal personality traits and 23 patients with first episode psychosis as well as 27 healthy controls. Participants underwent functional magnetic resonance imaging while performing an established 2-back WM task with two reward levels (5 CHF vs. no reward), which allowed us to assess common reward-cognition regions through whole-brain conjunction analyses and to investigate relations with clinical scores of negative symptoms. As expected for behavior, reward facilitated performance while cognitive load diminished it. At the neural level, the conjunction of high reward and high cognitive load contrasts across the psychosis continuum showed increased hemodynamic activity in the thalamus and the cerebellar vermis. During high cognitive load, more severe apathy but not diminished expression in the psychosis continuum was associated with reduced activity in right lateral orbitofrontal cortex, midbrain, posterior vermal cerebellum, caudate and lateral parietal cortex. Our results suggest that hypoactivity in the cerebellar vermis and the cortical-striatal-midbrain-circuitry in the psychosis continuum relates to apathy possibly via impaired flexible cognitive resource allocation for effective goal pursuit.

Payoff security combined with reciprocal upper semicontinuity is sufficient for better-reply security, and consequently for the existence of a pure strategy Nash equilibrium in compact, quasiconcave games by Reny's (1999) theorem. Analogously, diagonal payoff security combined with upper semicontinuity of the diagonal payoff function has been widely understood to be sufficient for diagonal better-reply security, and consequently for the existence of a symmetric pure strategy Nash equilibrium in compact, diagonally quasiconcave, quasi-symmetric games. We show by example that this is incorrect. Specifically, diagonal better-reply security may fail to hold, and a symmetric pure strategy equilibrium may fail to exist, if some player's payoff function lacks lower semicontinuity, with respect to the opponents' symmetric strategy profile, at all strategy profiles reached from a non-equilibrium profile on the diagonal by a unilateral better response of that player. These difficulties disappear, both in the game and in its mixed extension, if the lower bound on a player's payoff in the definition of diagonal payoff security is raised to reflect the higher levels that arbitrary better responses may achieve. We also discuss the relationship between our strengthened condition and diagonal payoff security.