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Tuesday, November 18, 2014

Race past

When Canvassers Became Activists: Antislavery Petitioning and the Political Mobilization of American Women

Daniel Carpenter & Colin Moore
American Political Science Review, August 2014, Pages 479-498

Abstract:
Examining an original dataset of more than 8,500 antislavery petitions sent to Congress (1833–1845), we argue that American women's petition canvassing conferred skills and contacts that empowered their later activism. We find that women canvassers gathered 50% or more signatures (absolute and per capita) than men while circulating the same petition requests in the same locales. Supplementary evidence (mainly qualitative) points to women's persuasive capacity and network building as the most plausible mechanisms for this increased efficacy. We then present evidence that leaders in the women's rights and reform campaigns of the nineteenth century were previously active in antislavery canvassing. Pivotal signers of the Seneca Falls Declaration were antislavery petition canvassers, and in an independent sample of post–Civil War activists, women were four times more likely than men to have served as identifiable antislavery canvassers. For American women, petition canvassing — with its patterns of persuasion and networking — shaped legacies in political argument, network formation, and organizing.

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Pathways From Racial Discrimination to Multiple Sexual Partners Among Male African American Adolescents

Steven Kogan et al.
Psychology of Men & Masculinity, forthcoming

Abstract:
African American male adolescents’ involvement with multiple sexual partners has important implications for public health as well as for their development of ideas regarding masculinity and sexuality. The purpose of this study was to test hypotheses regarding the pathways through which racial discrimination affects African American adolescents’ involvement with multiple sexual partners. We hypothesized that racial discrimination would engender psychological distress, which would promote attitudes and peer affiliations conducive to multiple sexual partnerships. The study also examined the protective influence of parenting practices in buffering the influence of contextual stressors. Participants were 221 African American male youth who provided data at ages 16 and 18 years; their parents provided data on family socioeconomic disadvantages. Of these young men, 18.5% reported having 3 or more sexual partners during the past 3 months. Structural equation models indicated that racial discrimination contributed to sexual activity with multiple partners by inducing psychological distress, which, in turn, affected attitudes and peer affiliations conducive to multiple partners. The experience of protective parenting, which included racial socialization, closeness and harmony in parent–child relationships, and parental monitoring, buffered the influence of racial discrimination on psychological distress. These findings suggest targets for prevention programming and underscore the importance of efforts to reduce young men’s experience with racial discrimination.

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Political Polarization as a Social Movement Outcome: 1960s Klan Activism and Its Enduring Impact on Political Realignment in Southern Counties, 1960 to 2000

Rory McVeigh, David Cunningham & Justin Farrell
American Sociological Review, forthcoming

Abstract:
Radical social movements can exacerbate tensions in local settings while drawing attention to how movement goals align with political party agendas. Short-term movement influence on voting outcomes can endure when orientations toward the movement disrupt social ties, embedding individuals within new discussion networks that reinforce new partisan loyalties. To demonstrate this dynamic, we employ longitudinal data to show that increases in Republican voting, across several different time intervals, were most pronounced in southern counties where the Ku Klux Klan had been active in the 1960s. In an individual-level analysis of voting intent, we show that decades after the Klan declined, racial attitudes map onto party voting among southern voters, but only in counties where the Klan had been active.

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Early Life Environment and Racial Inequality in Education and Earnings in the United States

Kenneth Chay, Jonathan Guryan & Bhashkar Mazumder
NBER Working Paper, October 2014

Abstract:
Chay, Guryan and Mazumder (2009) found substantial racial convergence in AFQT and NAEP scores across cohorts born in the 1960’s and early 1970’s that was concentrated among blacks in the South. We demonstrated a close tracking between variation in the test score convergence across states and racial convergence in measures of health and hospital access in the years immediately after birth. This study analyzes whether the across-cohort patterns in the black-white education and earnings gaps match those in early life health and test scores already established. It also addresses caveats in the earlier study, such as unobserved selection into taking the AFQT and potential discrepancies between state-of-birth and state-of-test taking. With Census data, we find: i) a significant narrowing across the same cohorts in education gaps driven primarily by a relative increase in the probability of blacks going to college; and ii) a similar convergence in relative earnings that is insensitive to adjustments for employment selection, as well as time and age effects that vary by race and state-of-residence. The variation in racial convergence across birth states matches the patterns in the earlier study. The magnitude of the earnings gains is greater than can be explained by only the black gains in education and test scores for reasonable estimates of the returns to human capital. This suggests that other pre-market, productivity factors also improved across successive cohorts of blacks born in the South between the early 1960’s and early 1970’s. Finally, our cohort-based hypothesis provides a cohesive explanation for the aggregate patterns in several, previously disconnected literatures.

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“Racism Still Exists”: A Public Health Intervention Using Racism “Countermarketing” Outdoor Advertising in a Black Neighborhood

Naa Oyo Kwate
Journal of Urban Health, October 2014, Pages 851-872

Abstract:
The negative health effects of racism have been well documented, but how to intervene to redress these effects has been little studied. This study reports on RISE (Racism Still Exists), a high-risk, high-reward public health intervention that used outdoor advertising to disseminate a “countermarketing” campaign in New York City (NYC). Over 6 months, the campaign advertised stark facts about the persistence of racism in the USA. A probability sample of N = 144 participants from two predominantly Black NYC neighborhoods completed measures of health status, health behaviors, and social attitudes. Three months postintervention, statistically significant declines in psychological distress were seen among study participants who were exposed to the campaign compared to those who were not. There were no changes in other hypothesized outcomes. The campaign also generated significant public discourse, particularly in social media. The results suggest that racism countermarketing campaigns may have promise as a community-based intervention to address health inequalities.

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Caste-based Crimes and Economic Status: Evidence from India

Smriti Sharma
Journal of Comparative Economics, forthcoming

Abstract:
Crimes against the historically marginalized Scheduled Castes and Scheduled Tribes (SC and ST) by the upper castes in India represent an extreme form of prejudice and discrimination. In this paper, we investigate whether changes in relative material standards of living between the SCs/STs and upper castes - as measured by the ratio of consumption expenditures of SCs/STs to that of upper castes - are associated with changes in the incidence of crimes against SCs/STs. Based on the hierarchical social structure implied by the caste system, we posit that an increase in the expenditure ratio is positively correlated with the incidence of crimes committed by the upper castes against the lower castes. Using official district level crime data for the period 2001-10, we find a positive association between crimes and expenditure of SC/ST vis-á-vis the upper castes. Further, distinguishing between violent and non-violent crimes, we find it is the violent crimes that are responsive to changes in economic gaps. Moreover, this relationship is on account of changes in the upper castes’ economic well-being rather than changes in the economic position of the SCs and STs.

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Racial and Spatial Targeting: Segregation and Subprime Lending within and across Metropolitan Areas

Jackelyn Hwang, Michael Hankinson & Kreg Steven Brown
Social Forces, forthcoming

Abstract:
Recent studies find that high levels of black-white segregation increased rates of foreclosures and subprime lending across US metropolitan areas during the housing crisis. These studies speculate that segregation created distinct geographic markets that enabled subprime lenders and brokers to leverage the spatial proximity of minorities to disproportionately target minority neighborhoods. Yet, the studies do not explicitly test whether the concentration of subprime loans in minority neighborhoods varied by segregation levels. We address this shortcoming by integrating neighborhood-level data and spatial measures of segregation to examine the relationship between segregation and subprime lending across the 100 largest US metropolitan areas. Controlling for alternative explanations of the housing crisis, we find that segregation is strongly associated with higher concentrations of subprime loans in clusters of minority census tracts but find no evidence of unequal lending patterns when we examine minority census tracts in an aspatial way. Moreover, residents of minority census tracts in segregated metropolitan areas had higher likelihoods of receiving subprime loans than their counterparts in less segregated metropolitan areas. Our findings demonstrate that segregation played a pivotal role in the housing crisis by creating relatively larger areas of concentrated minorities into which subprime loans could be efficiently and effectively channeled. These results are consistent with existing but untested theories on the relationship between segregation and the housing crisis in metropolitan areas.

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Racial Discrimination, Fear of Crime, and Variability in Blacks’ Preferences for Punitive and Preventative Anti-crime Policies

Mark Ramirez
Political Behavior, forthcoming

Abstract:
A growing body of research recognizes that people’s policy opinions are not simply positive or negative, but instead derive from a variety of positive and negative beliefs related to a political issue. This research expands this insight by explaining the variability in support for punitive anti-crime policies among black Americans. Data from a nationally representative survey of black Americans (n = 515) are used to show that a majority of blacks are conflicted between a strong desire to reduce crime and perceptions of widespread racial discrimination within the criminal justice system. Using a heteroskedastic item response theory model, I demonstrate that conflict between these beliefs results in far greater variability around their support for punitive, but not preventative policies. Both the conflict and variability of many black Americans’ preferences on punitive anti-crime policies complicates their ability to clearly voice their support for or opposition toward punitive policies and likely limits the ability of elected officials to represent members of this community.

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Racial Microaggressions and Asian Americans: An Exploratory Study on Within-Group Differences and Mental Health

Kevin Nadal et al.
Asian American Journal of Psychology, forthcoming

Abstract:
Racial microaggressions are subtle forms of discrimination that have been found to have negative effects on the mental health of people of color. Due to the dearth of quantitative research that has examined the influence of racial microaggressions on Asian Americans, we recruited an Asian American sample (N = 157) for the current study to investigate the relationship between racial microaggressions with depression and other mental health symptoms. Recruited from both community and college populations, the sample consisted of 107 Asian American women and 50 men, with varying educational backgrounds, immigration statuses, and geographic locations in the U.S. Using the Racial and Ethnic Microaggressions Scales (REMS; Nadal, 2011b) and the Mental Health Inventory (MHI; McHorney, Ware, Rogers, Raczek, & Lu, 1992), there were 2 major findings. First, after controlling for education, hierarchical regression analyses indicated that racial microaggressions predicted general mental health problems: F(2, 91) = 11.37, p <.00, with the model explaining approximately 20% of the variance (R2 = .20, adjusted R2 = .09). Second, although comparative t tests did not yield significant differences based on gender or immigration status, t tests did reveal that Asian Americans experience various types of microaggression, based on geographic location, education, and age. Research implications for Asian American psychology and recommendations for clinical practice will be discussed.

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White Flight and the Presence of Neighborhood Nonprofit Organizations: Ethno-racial Transition, Poverty, and Organizational Resources

Eve Garrow & Samuel Garrow
Race and Social Problems, December 2014, Pages 328-341

Abstract:
A growing body of evidence suggests that urban neighborhoods of color experience a dearth of institutional resources, including parks and social services. Yet, little is known of how a key process in the creation and maintenance of racially and ethnically segregated neighborhoods — the flight of whites from integrating neighborhoods — influences the availability of nonprofit human services. Drawing insights from the place stratification perspective and the sociological study of residential segregation by race and ethnicity, we develop hypotheses on the relationship between white flight and nonprofit presence, and test them with a dataset that combines census tract data with data on all nonprofit human service organizations in Los Angeles County in 2001 and 2011. Consistent with the place stratification perspective, we find that white flight is negatively associated with the presence of nonprofit human services after controlling for neighborhood structural characteristics. However, the expectation that the negative effect of white flight on organizational numbers is stronger in poor neighborhoods than in nonpoor neighborhoods is not supported. The negative association between white flight and the presence of nonprofits is equally as pronounced in neighborhoods with low and high levels of poverty.

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Race, Sovereignty, and Civil Rights: Understanding the Cherokee Freedmen Controversy

Circe Sturm
Cultural Anthropology, August 2014, Pages 575–598

Abstract:
Despite a treaty in 1866 between the Cherokee Nation and the federal government granting them full tribal citizenship, Cherokee Freedmen — the descendants of African American slaves to the Cherokee, as well as of children born from unions between African Americans and Cherokee tribal members — continue to be one of the most marginalized communities within Indian Country. Any time Freedmen have sought the full rights and benefits given other Cherokee citizens, they have encountered intense opposition, including a 2007 vote that effectively ousted them from the tribe. The debates surrounding this recent decision provide an excellent case study for exploring the intersections of race and sovereignty. In this article, I use the most recent Cherokee Freedmen controversy to examine how racial discourse both empowers and diminishes tribal sovereignty, and what happens in settler-colonial contexts when the exercise of tribal rights comes into conflict with civil rights. I also explore how settler colonialism as an analytic can obscure the racialized power dynamics that undermine Freedmen claims to an indigenous identity and tribal citizenship.

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Double Jeopardy: Why Latinos Were Hit Hardest by the US Foreclosure Crisis

Jacob Rugh
Social Forces, forthcoming

Abstract:
Recent research has demonstrated that Latinos have been hit hardest by the US foreclosure crisis. In this article, I combine place stratification and spatial assimilation theory to explain why Latinos suffered a devastating double blow during the foreclosure crisis. Using a national sample of borrowers who received risky mortgage loans during the boom and following them through the crisis, I find that Latinos were most likely subject to high-cost subprime lending and especially risky low-/no-documentation lending as Latino suburbanization and immigration peaked along with national home prices. As a result, while Latino borrowers were no less likely to lose their homes to foreclosure than blacks prior to the crisis or in the Rust Belt, they were significantly more likely to lose their homes after the crisis began and in the Sand States of Arizona, California, Florida, and Nevada. Taken together, the results demonstrate the risk of rising Latino immigration, suburbanization, and homeownership during the stages of the housing boom and foreclosure crisis.

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Racial Segregation and Quality of Care Disparity in US Nursing Homes

Momotazur Rahman & Andrew Foster
Journal of Health Economics, forthcoming

Abstract:
In this paper we examine the contributions of travel distance and preferences for racial homogeneity as sources of nursing home segregation and racial disparities in nursing home quality. We first theoretically characterize the distinctive implications of these mechanisms for nursing home racial segregation. We then use this model to structure an empirical analysis of nursing home sorting. We find little evidence of differential willingness to pay for quality by race among first-time nursing home entrants, but do find significant distance and race-based preference effects. Simulation exercises suggest that both effects contribute importantly to racial disparities in nursing home quality.

By KEVIN LEWIS | 09:00:00 AM

Monday, November 17, 2014

Insufficient funds

Subprime Mortgage Defaults and Credit Default Swaps

Eric Arentsen et al.
Journal of Finance, forthcoming

Abstract:
We offer the first empirical evidence on the adverse effect of credit default swap (CDS) coverage on subprime mortgage defaults. Using a large database of privately securitized mortgages, we find that higher defaults concentrate in mortgage pools with concurrent CDS coverage, and within these pools the loans originated after or shortly before the start of CDS coverage have an even higher delinquency rate. The results are robust across zip code and origination quarter cohorts. Overall, we show that CDS coverage helped drive higher mortgage defaults during the financial crisis.

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The failure of models that predict failure: Distance, incentives, and defaults

Uday Rajan, Amit Seru & Vikrant Vig
Journal of Financial Economics, forthcoming

Abstract:
Statistical default models, widely used to assess default risk, fail to account for a change in the relations between different variables resulting from an underlying change in agent behavior. We demonstrate this phenomenon using data on securitized subprime mortgages issued in the period 1997–2006. As the level of securitization increases, lenders have an incentive to originate loans that rate high based on characteristics that are reported to investors, even if other unreported variables imply a lower borrower quality. Consistent with this behavior, we find that over time lenders set interest rates only on the basis of variables that are reported to investors, ignoring other credit-relevant information. As a result, among borrowers with similar reported characteristics, over time the set that receives loans becomes worse along the unreported information dimension. This change in lender behavior alters the data generating process by transforming the mapping from observables to loan defaults. To illustrate this effect, we show that the interest rate on a loan becomes a worse predictor of default as securitization increases. Moreover, a statistical default model estimated in a low securitization period breaks down in a high securitization period in a systematic manner: it underpredicts defaults among borrowers for whom soft information is more valuable. Regulations that rely on such models to assess default risk could, therefore, be undermined by the actions of market participants.

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Consumer Credit: Too Much or Too Little (or Just Right)?

Jonathan Zinman
Journal of Legal Studies, June 2014, Pages S209-S237

Abstract:
The intersection of research and policy on consumer credit often has a Goldilocks feel. Some researchers and policy makers posit that consumer credit markets produce too much credit. Other researchers and policy makers posit that markets produce too little credit. I review theories and evidence on inefficient consumer credit supply. For each of eight classes of theories I sketch some of the leading models and summarize any convincing empirical tests of those models. I also discuss more circumstantial evidence that does not map tightly onto a particular model but has the potential to shed light on, or obscure, answers to key questions. Overall there is a lack of convincing evidence on whether markets err and in which direction. We do not yet understand whether and under what conditions markets oversupply or undersupply credit, much less why.

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Do Financial Market Developments Influence Accounting Practices? Credit Default Swaps and Borrowers’ Reporting Conservatism

Xiumin Martin & Sugata Roychowdhury
Journal of Accounting and Economics, forthcoming

Abstract:
This paper investigates whether the initiation of trading in credit default swaps (CDSs) on a borrowing firm's outstanding debt is associated with a decline in that firm's reporting conservatism. CDS investments can modify lenders’ payoffs on their loan portfolios by providing insurance on negative credit outcomes. The onset of CDS trading reduces lenders’ incentives to continuously monitor borrowers and also their demand that borrowers report conservatively. Additionally, borrowers expect CDS-insured lenders to be more intransigent in renegotiations triggered by defaults and covenant violations. Since conservatism can trigger earlier covenant violations, borrowers have heightened incentives to report less conservatively in the post-CDS period. Using a differences-in-differences research design, we observe a decline in borrowing firms’ reporting conservatism after CDS trade initiation. This effect is more pronounced when reputation costs lenders face from reducing monitoring are lower, when debt contracts outstanding at the time of CDS trade initiation have more financial covenants, and when lenders who monitor borrowers more regularly in the pre-CDS period enter into CDS contracts to hedge their credit exposures.

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Managing markets for toxic assets

Christopher House & Yusufcan Masatlioglu
Journal of Monetary Economics, March 2015, Pages 84–99

Abstract:
A model in which banks trade toxic assets to raise funds for investment is analyzed. Toxic assets generate an adverse selection problem and, consequently, the interbank asset market provides insufficient liquidity. Investment is inefficiently low because acquiring funding requires banks to sell high-quality assets for less than their “fair” value. Equity injections reduce liquidity and may be counterproductive as a policy for increasing investment. Paradoxically, if it is directed to firms with the greatest liquidity needs, an equity injection will reduce investment further. Asset purchase programs, like the Public-Private Investment Program, often have favorable impacts on liquidity, investment and welfare.

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Systemic Risk and Stability in Financial Networks

Daron Acemoglu, Asuman Ozdaglar & Alireza Tahbaz-Salehi
American Economic Review, forthcoming

Abstract:
This paper argues that the extent of financial contagion exhibits a form of phase transition: as long as the magnitude of negative shocks affecting financial institutions are sufficiently small, a more densely connected financial network (corresponding to a more diversified pattern of interbank liabilities) enhances financial stability. However, beyond a certain point, dense interconnections serve as a mechanism for the propagation of shocks, leading to a more fragile financial system. Our results thus highlight that the same factors that contribute to resilience under certain conditions may function as significant sources of systemic risk under others.

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Financial Education, Financial Competence, and Consumer Welfare

Sandro Ambuehl, Douglas Bernheim & Annamaria Lusardi
NBER Working Paper, October 2014

Abstract:
We introduce the concept of financial competence, a measure of the extent to which individuals' financial choices align with those they would make if they properly understood their opportunity sets. Unlike existing measures of the quality of financial decision making, the concept is firmly rooted in the principles of choice-based behavioral welfare analysis; it also avoids the types of paternalistic judgments that are common in policy discussions. We document the importance of assessing financial competence by demonstrating, through an example, that an educational intervention can appear highly successful according to conventional outcome measures while failing to improve the quality of financial decision making. Specifically, we study a simple intervention concerning compound interest that significantly improves performance on a test of conceptual knowledge (which subjects report operationalizing in their decisions), and appears to counteract exponential growth bias. However, financial competence (welfare) does not improve. We trace the mechanisms that account for these seemingly divergent findings.

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Do rating agencies cater? Evidence from rating-based contracts

Pepa Kraft
Journal of Accounting and Economics, forthcoming

Abstract:
I examine whether rating agencies cater to borrowers with rating-based performance-priced loan contracts (PPrating firms). I use data from Moody's Financial Metrics on its quantitative adjustments for off-balance-sheet debt and qualitative adjustments for soft factors. In the cross-section and for borrowers experiencing adverse economic shocks, I find that these adjustments are more favorable for PPrating firms than for other firms, consistent with rating agencies catering to the PPrating borrowers. I find that this catering is muted in two circumstances when rating agencies' reputational costs are higher than usual: (1) near the investment grade and prime short-term rating thresholds and (2) when Fitch Ratings also provides a rating.

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The Futility of Cost-Benefit Analysis in Financial Disclosure Regulation

Omri Ben-Shahar & Carl Schneider
Journal of Legal Studies, June 2014, Pages S253-S271

Abstract:
What would happen if cost-benefit analysis (CBA) were applied to disclosure regulations? Mandated disclosure has largely escaped rigorous CBA because it looks so plausible: disclosure seems rich in benefits and low in cost. This article makes two arguments. First, it previews our thesis in More Than You Wanted to Know that disclosure laws do not deliver their anticipated benefits and thus cannot easily pass quantified CBA. Second, it describes a previously unrecognized cost of disclosure, one arising from lawmakers’ collective-action problem. With the proliferation of disclosures, each new mandate diminishes the attention that people can give to other information, including all other disclosures. The problem for CBA is lawmakers’ inability to coordinate laws across different fields and jurisdictions. This article illustrates this regulatory failure by examining the rigorous cost-effectiveness analysis conducted by the Consumer Financial Protection Bureau for its recent mortgage disclosure regulation.

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Intrinsically Advantageous? Reexamining the Production of Class Advantage in the Case of Home Mortgage Modification

Lindsay Owens
Social Forces, forthcoming

Abstract:
Social class confers a bundle of capabilities, practices, and beliefs that are conventionally assumed to be hierarchical, rigid, and self-perpetuating. However, this framework often belies the fact that these qualities needn't be necessarily or exhaustively advantageous. In particular, social change may render obsolete class-linked characteristics that were advantageous in previous periods. Drawing on interviews with homeowners at risk of foreclosure and a yearlong ethnography of a housing counseling organization, I find that although the housing crisis of the “Great Recession” affected both working- and middle-class homeowners alike, the practices of working-class borrowers better positioned them to exploit a number of informational advantages in the rapidly changing mortgage modification setting. My findings are a departure from existing research that treats middle-class capabilities and practices as intrinsically advantageous.

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The Political Economy of Regulation in Markets with Naïve Consumers

Patrick Warren & Daniel Wood
Journal of the European Economic Association, forthcoming

Abstract:
In a model of a competitive industry selling base goods and add-ons, we investigate the conditions under which citizen-consumers will support policies that eliminate behavioral inefficiencies induced by naïve consumers. Unregulated competitive markets have two effects: they produce deadweight losses, and they redistribute income away from biased consumers. Both unbiased and naïve consumers believe that they benefit from this redistribution (the naïve consumers are wrong), so support for efficiency-improving regulation is limited. Extending our model to consumers with partial sophistication about their naïveté, we predict patterns of regulation consistent with the form and timing of the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009.

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Strategic or Nonstrategic: The Role of Financial Benefit in Bankruptcy

Shuoxun Zhang, Tarun Sabarwal & Li Gan
Economic Inquiry, forthcoming

Abstract:
A partial test for strategic behavior in bankruptcy filing may be formulated by testing whether consumers manipulate their debt and filing decision jointly, or not: that is, testing for endogeneity of financial benefit and the bankruptcy filing decision. Using joint maximum likelihood estimation of an extended discrete choice model, test results are consistent with nonstrategic filing: financial benefit is exogenous to the filing decision. This result is confirmed in two different datasets (Panel Study of Income Dynamics and Survey of Consumer Finances). This result is consistent with an ex ante low net gain from a bankruptcy filing; a type of “rational inattention” to rare events such as bankruptcy.

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Payday Lending Regulation and the Demand for Alternative Financial Services

Roman Galperin & Andrew Weaver
Johns Hopkins University Working Paper, September 2014

Abstract:
In this paper we use a novel empirical strategy to estimate the net benefit of regulatory restrictions on the supply of fringe credit products. Our estimation measures the effect of strict regulation and prohibition of one such product — payday loans — on demand for another product — refund anticipation loans (RALs). Using a policy discontinuity at state border approach with zip-code-level panel data, we find an economically and statistically significant negative effect of strict regulation of payday loans on demand for RALs. A state ban on payday lending results in about five percent reduction in demand for RALs. We interpret this effect as evidence that the behavioral component is stronger than the rational-strategic component of demand for payday loans, indicating that strict regulation of payday loans may benefit households on net. We conclude with a discussion of implications for policy.

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Securitization and the Fixed-Rate Mortgage

Andreas Fuster & James Vickery
Review of Financial Studies, forthcoming

Abstract:
Fixed-rate mortgages (FRMs) dominate the U.S. mortgage market, with important consequences for monetary policy, household risk management, and financial stability. We show that the FRM market share is sharply lower when mortgages are difficult to securitize, exploiting plausibly exogenous variation in access to liquid securitization markets generated by a regulatory cutoff and time variation in private securitization activity. We interpret our findings as evidence that lenders are reluctant to retain the prepayment and interest rate risk embedded in FRMs. The form of securitization (private versus government backed) has little effect on FRM supply during periods in which private securitization markets are well functioning.

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New Evidence on the Impact of Financial Crises in Advanced Countries

Christina Romer & David Romer
University of California Working Paper, October 2014

Abstract:
This paper revisits the aftermath of financial crises in advanced countries in the decades before the Great Recession. We construct a new series on financial distress in 24 OECD countries for the period 1967–2007. The series is based on narrative assessments of the health of countries’ financial systems that were made in real time; and it classifies financial distress on a relatively fine scale, rather than treating it as a 0-1 variable. We find little support for the conventional wisdom that the output declines following financial crises are uniformly large and long-lasting. Rather, the declines are highly variable, on average only moderate, and often temporary. One important driver of the variation in outcomes across crises appears to be the severity and persistence of the financial distress itself: when distress is particularly extreme or continues for an extended period, the aftermath of a crisis is worse.

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The Evolution of Bank Supervision: Evidence from U.S. States

Kris James Mitchener & Matthew Jaremski
NBER Working Paper, October 2014

Abstract:
We use a novel data set spanning 1820-1910 to examine the origins of bank supervision and assess factors leading to the creation of formal bank supervision across U.S. states. We show that it took more than a century for the widespread adoption of independent supervisory institutions tasked with maintaining the safety and soundness of banks. State legislatures initially pursued cheaper regulatory alternatives, such as double liability laws; however, banking distress at the state level as well as the structural shift from note-issuing to deposit-taking commercial banks and competition with national banks propelled policymakers to adopt costly and permanent supervisory institutions.

By KEVIN LEWIS | 09:00:00 AM

Sunday, November 16, 2014

Togetherness

Children Conform to the Behavior of Peers; Other Great Apes Stick With What They Know

Daniel Haun, Yvonne Rekers & Michael Tomasello
Psychological Science, forthcoming

Abstract:
All primates learn things from conspecifics socially, but it is not clear whether they conform to the behavior of these conspecifics — if conformity is defined as overriding individually acquired behavioral tendencies in order to copy peers’ behavior. In the current study, chimpanzees, orangutans, and 2-year-old human children individually acquired a problem-solving strategy. They then watched several conspecific peers demonstrate an alternative strategy. The children switched to this new, socially demonstrated strategy in roughly half of all instances, whereas the other two great-ape species almost never adjusted their behavior to the majority’s. In a follow-up study, children switched much more when the peer demonstrators were still present than when they were absent, which suggests that their conformity arose at least in part from social motivations. These results demonstrate an important difference between the social learning of humans and great apes, a difference that might help to account for differences in human and nonhuman cultures.

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Human Faces Are Slower than Chimpanzee Faces

Anne Burrows et al.
PLoS ONE, October 2014

Background: While humans (like other primates) communicate with facial expressions, the evolution of speech added a new function to the facial muscles (facial expression muscles). The evolution of speech required the development of a coordinated action between visual (movement of the lips) and auditory signals in a rhythmic fashion to produce “visemes” (visual movements of the lips that correspond to specific sounds). Visemes depend upon facial muscles to regulate shape of the lips, which themselves act as speech articulators. This movement necessitates a more controlled, sustained muscle contraction than that produced during spontaneous facial expressions which occur rapidly and last only a short period of time. Recently, it was found that human tongue musculature contains a higher proportion of slow-twitch myosin fibers than in rhesus macaques, which is related to the slower, more controlled movements of the human tongue in the production of speech. Are there similar unique, evolutionary physiologic biases found in human facial musculature related to the evolution of speech?

Methodology/Prinicipal Findings: Using myosin immunohistochemistry, we tested the hypothesis that human facial musculature has a higher percentage of slow-twitch myosin fibers relative to chimpanzees (Pan troglodytes) and rhesus macaques (Macaca mulatta). We sampled the orbicularis oris and zygomaticus major muscles from three cadavers of each species and compared proportions of fiber-types. Results confirmed our hypothesis: humans had the highest proportion of slow-twitch myosin fibers while chimpanzees had the highest proportion of fast-twitch fibers.

Conclusions/significance: These findings demonstrate that the human face is slower than that of rhesus macaques and our closest living relative, the chimpanzee. They also support the assertion that human facial musculature and speech co-evolved. Further, these results suggest a unique set of evolutionary selective pressures on human facial musculature to slow down while the function of this muscle group diverged from that of other primates.

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Narcissism and Emotional Contagion: Do Narcissists “Catch” the Emotions of Others?

Anna Czarna et al.
Social Psychological and Personality Science, forthcoming

Abstract:
In this research, we investigated the association between narcissism and one central aspect of empathy, susceptibility to emotional contagion (the transfer of emotional states from one person to another). In a laboratory study (N = 101), we detected a negative link between narcissism and emotional contagion in response to experimentally induced positive affect. In an online study (N = 195), narcissism was negatively linked to experimentally induced emotional contagion regardless of valence. These findings indicate that individuals with high narcissism levels are apparently less prone to emotional contagion than individuals lower in narcissism. Hence, narcissists are less likely to “catch the emotions” of others. Furthermore, by comparing experimental assessments of susceptibility to emotional contagion with subjective self-reports, we were able to study self-insight. Across both samples, self-insight was generally low, and individual differences in self-insight were unrelated to narcissism.

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Automatic Personality Assessment Through Social Media Language

Gregory Park et al.
Journal of Personality and Social Psychology, forthcoming

Abstract:
Language use is a psychologically rich, stable individual difference with well-established correlations to personality. We describe a method for assessing personality using an open-vocabulary analysis of language from social media. We compiled the written language from 66,732 Facebook users and their questionnaire-based self-reported Big Five personality traits, and then we built a predictive model of personality based on their language. We used this model to predict the 5 personality factors in a separate sample of 4,824 Facebook users, examining (a) convergence with self-reports of personality at the domain- and facet-level; (b) discriminant validity between predictions of distinct traits; (c) agreement with informant reports of personality; (d) patterns of correlations with external criteria (e.g., number of friends, political attitudes, impulsiveness); and (e) test–retest reliability over 6-month intervals. Results indicated that language-based assessments can constitute valid personality measures: they agreed with self-reports and informant reports of personality, added incremental validity over informant reports, adequately discriminated between traits, exhibited patterns of correlations with external criteria similar to those found with self-reported personality, and were stable over 6-month intervals. Analysis of predictive language can provide rich portraits of the mental life associated with traits. This approach can complement and extend traditional methods, providing researchers with an additional measure that can quickly and cheaply assess large groups of participants with minimal burden.

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Adolescent Neighborhood Quality Predicts Adult dACC Response to Social Exclusion

Marlen Gonzalez et al.
Social Cognitive and Affective Neuroscience, forthcoming

Abstract:
Neuroimaging studies using the social-exclusion paradigm Cyberball indicate increased dACC and right insula activity as a function of exclusion. However, comparatively less work has been done on how social status factors may moderate this finding. The current study used the Cyberball paradigm with 85 (45 female) socio-economically diverse participants from a larger longitudinal sample. We tested whether neighborhood quality during adolescence would predict subsequent neural responding to social exclusion in young adulthood. Given previous behavioral studies indicating greater social vigilance and negative evaluation as a function of lower status, we expected that lower adolescent neighborhood quality would predict greater dACC activity during exclusion at young adulthood. Our findings indicate that young adults who lived in low-quality neighborhoods in adolescence showed greater dACC activity to social exclusion than those who lived in higher-quality neighborhoods. Lower neighborhood quality also predicted greater prefrontal activation in the superior frontal gyrus, dorsal medial prefrontal cortext, and the middle frontal gyrus, possibly indicating greater regulatory effort. Finally, this effect was not driven by subsequent ratings of distress during exclusion. In sum, adolescent neighborhood quality appears to potentiate neural responses to social exclusion in young adulthood, effects that are independent of felt distress.

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Predictability of Extreme Events in Social Media

José Miotto & Eduardo Altmann
PLoS ONE, November 2014

Abstract:
It is part of our daily social-media experience that seemingly ordinary items (videos, news, publications, etc.) unexpectedly gain an enormous amount of attention. Here we investigate how unexpected these extreme events are. We propose a method that, given some information on the items, quantifies the predictability of events, i.e., the potential of identifying in advance the most successful items. Applying this method to different data, ranging from views in YouTube videos to posts in Usenet discussion groups, we invariantly find that the predictability increases for the most extreme events. This indicates that, despite the inherently stochastic collective dynamics of users, efficient prediction is possible for the most successful items.

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OXTR Polymorphism Predicts Social Relationships through its Effects on Social Temperament

Kasey Creswell et al.
Social Cognitive and Affective Neuroscience, forthcoming

Abstract:
Humans have a fundamental need for strong interpersonal bonds, yet individuals differ appreciably in their degree of social integration. That these differences are also substantially heritable has spurred interest in biological mechanisms underlying the quality and quantity of individuals' social relationships. We propose that polymorphic variation in the oxytocin receptor gene (OXTR) associates with complex social behaviors and social network composition through intermediate effects on negative affectivity and the psychological processing of socially-relevant information. We tested a hypothesized social cascade from the molecular level (OXTR variation) to the social environment, through negative affectivity and inhibited sociality, in a sample of 1,295 men and women of European American (N=1081) and African American (N=214) ancestry. Compared to European Americans having any T allele of rs1042778, individuals homozygous for the alternate G allele reported significantly lower levels of negative affectivity and inhibited sociality, which in turn predicted significantly higher levels of social support and a larger/more diverse social network. Moreover, the effect of rs1042778 variation on social support was fully accounted for by associated differences in negative affectivity and inhibited sociality. Results replicated in the African American sample. Findings suggest that OXTR variation modulates levels of social support via proximal impacts on individual temperament.

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Friends With Each Other but Strangers to You: Source Relationship Softens Ostracism’s Blow

Nicole Iannone et al.
Group Dynamics, forthcoming

Abstract:
This study explored how the relationship between sources of ostracism, whether they are friends or strangers to each other, influences the targeted person’s reactions to ostracism. Participants interacted with 2 confederates who indicated that they were friends or strangers with each other. Participants were then ostracized or included by the confederates in Cyberball. The results indicated that being ostracized by 2 people who were strangers to each other made participants feel worse than being ostracized by 2 people who were friends with each other. Additionally, participants felt best being included by 2 people who were strangers to each other. These findings may have occurred as a result of differential expectations for inclusion and exclusion from 2 people who are friends, rather than strangers, to each other.

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The Long Goodbye: A Test of Grief as a Social Signal

Tania Reynolds et al.
Evolutionary Behavioral Sciences, forthcoming

Abstract:
The human grief response has perplexed researchers. Grief is costly, leading to painful and potentially deleterious symptoms. Yet, it is a human universal. We argue that grief functions as a hard-to-fake signal of underlying capacities to form strong social bonds. If so, those who grieve more intensively than others should be perceived as higher quality social partners. We tested this hypothesis in 4 studies. High grievers were rated as nicer, more loyal, and more trustworthy than low grievers. High grievers were also expected to cooperate in a prisoner’s dilemma more than low grievers. Last, high grievers were chosen as a trusted social partner more than another individual who expressed sadness for lost material items, indicating that grief may be a specific display of distress that is particularly informative to potential social partners. These results support a signaling theory of grief and are discussed in that context.

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Autistic empathy toward autistic others

Hidetsugu Komeda et al.
Social Cognitive and Affective Neuroscience, forthcoming

Abstract:
Individuals with Autism Spectrum Disorder (ASD) are thought to lack self-awareness and to experience difficulty empathising with others. Although these deficits have been demonstrated in previous studies, most of the target stimuli were constructed for typically developing (TD) individuals. We employed judgment tasks capable of indexing self-relevant processing in individuals with and without ASD. Fourteen Japanese males and one Japanese female with high-functioning ASD (17–41 years of age) and 13 Japanese males and two TD Japanese females (22–40 years of age), all of whom were matched for age and full and verbal intelligence quotient scores with the ASD participants, were enrolled in this study. The results demonstrated that the ventromedial prefrontal cortex was significantly activated in individuals with ASD in response to autistic characters and in TD individuals in response to non-autistic characters. Whereas the frontal-posterior network between the ventromedial prefrontal cortex and superior temporal gyrus participated in the processing of non-autistic characters in TD individuals, an alternative network was involved when individuals with ASD processed autistic characters. This suggests an atypical form of empathy in individuals with ASD toward others with ASD.

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Troubling Gifts of Care: Vulnerable Persons and Threatening Exchanges in Chicago's Home Care Industry

Elana Buch
Medical Anthropology Quarterly, forthcoming

Abstract:
By tracing the transformations of troubling exchanges in paid home care, this article examines how differently positioned individuals strive to build caring relations within potentially restrictive regimes of care. In paid home care in Chicago, older adults and their workers regularly participate in exchanges of money, time, and material goods. These gifts play a crucial role in building good care relationships that sustain participants’ moral personhood. Amid widespread concern about vulnerable elders, home care agencies compete in a crowded marketplace by prohibiting these exchanges, even as they depend on them to strengthen relationships. Supervisors thus exercise discretion, sometimes reclassifying gift exchanges as punishable thefts. In this context, the commodification of care did not lead to the actual elimination of gift relations, but rather transformed gift relations into a suspicious and troublesome source of value.

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Attachment-security priming attenuates amygdala activation to social and linguistic threat

Luke Norman et al.
Social Cognitive and Affective Neuroscience, forthcoming

Abstract:
A predominant expectation that social relationships with others are safe (a secure attachment-style), has been linked with reduced threat-related amygdala activation. Experimental priming of mental representations of attachment security can modulate neural responding, but the effects of attachment-security priming on threat-related amygdala activation remains untested. Using functional magnetic resonance imaging (fMRI), the present study examined the effects of trait and primed attachment security on amygdala reactivity to threatening stimuli in an emotional faces and a linguistic dot-probe task in forty-two healthy participants. Trait attachment anxiety and attachment avoidance were positively correlated with amygdala activation to threatening faces in the control group, but not in the attachment primed group. Furthermore, participants who received attachment-security priming showed attenuated amygdala activation in both the emotional faces and dot-probe tasks. The current findings demonstrate that variation in state and trait attachment security modulates amygdala reactivity to threat. These findings support the potential use of attachment security-boosting methods as interventions and suggest a neural mechanism for the protective effect of social bonds in anxiety disorders.

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Why We Think We Can't Dance: Theory of Mind and Children's Desire to Perform

Lan Nguyen Chaplin & Michael Norton
Child Development, forthcoming

Abstract:
Theory of mind (ToM) allows children to achieve success in the social world by understanding others' minds. A study with 3- to 12-year-olds, however, demonstrates that gains in ToM are linked to decreases in children's desire to engage in performative behaviors associated with health and well-being, such as singing and dancing. One hundred and fifty-nine middle-class children from diverse backgrounds in a Northeastern U.S. metropolitan area completed the study in 2011. The development of ToM is associated with decreases in self-esteem, which in turn predicts decreases in children's willingness to perform. This shift away from performance begins at age 4 (when ToM begins to develop), years before children enter puberty.

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Tell Me the Gossip: The Self-Evaluative Function of Receiving Gossip About Others

Elena Martinescu, Onne Janssen & Bernard Nijstad
Personality and Social Psychology Bulletin, December 2014, Pages 1668-1680

Abstract:
We investigate the self-evaluative function of competence-related gossip for individuals who receive it. Using the Self-Concept Enhancing Tactician (SCENT) model, we propose that individuals use evaluative information about others (i.e., gossip) to improve, promote, and protect themselves. Results of a critical incident study and an experimental study showed that positive gossip had higher self-improvement value than negative gossip, whereas negative gossip had higher self-promotion value and raised higher self-protection concerns than positive gossip. Self-promotion mediated the relationship between gossip valence and pride, while self-protection mediated the relationship between gossip valence and fear, although the latter mediated relationship emerged for receivers with mastery goals rather than performance goals. These results suggest that gossip serves self-evaluative functions for gossip receivers and triggers self-conscious emotions.

By KEVIN LEWIS | 09:00:00 AM

Saturday, November 15, 2014

Sensemaking

Action video game play facilitates the development of better perceptual templates

Vikranth Bejjanki et al.
Proceedings of the National Academy of Sciences, forthcoming

Abstract:
The field of perceptual learning has identified changes in perceptual templates as a powerful mechanism mediating the learning of statistical regularities in our environment. By measuring threshold-vs.-contrast curves using an orientation identification task under varying levels of external noise, the perceptual template model (PTM) allows one to disentangle various sources of signal-to-noise changes that can alter performance. We use the PTM approach to elucidate the mechanism that underlies the wide range of improvements noted after action video game play. We show that action video game players make use of improved perceptual templates compared with nonvideo game players, and we confirm a causal role for action video game play in inducing such improvements through a 50-h training study. Then, by adapting a recent neural model to this task, we demonstrate how such improved perceptual templates can arise from reweighting the connectivity between visual areas. Finally, we establish that action gamers do not enter the perceptual task with improved perceptual templates. Instead, although performance in action gamers is initially indistinguishable from that of nongamers, action gamers more rapidly learn the proper template as they experience the task. Taken together, our results establish for the first time to our knowledge the development of enhanced perceptual templates following action game play. Because such an improvement can facilitate the inference of the proper generative model for the task at hand, unlike perceptual learning that is quite specific, it thus elucidates a general learning mechanism that can account for the various behavioral benefits noted after action game play.

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Blind Insight: Metacognitive Discrimination Despite Chance Task Performance

Ryan Scott et al.
Psychological Science, forthcoming

Abstract:
Blindsight and other examples of unconscious knowledge and perception demonstrate dissociations between judgment accuracy and metacognition: Studies reveal that participants’ judgment accuracy can be above chance while their confidence ratings fail to discriminate right from wrong answers. Here, we demonstrated the opposite dissociation: a reliable relationship between confidence and judgment accuracy (demonstrating metacognition) despite judgment accuracy being no better than chance. We evaluated the judgments of 450 participants who completed an AGL task. For each trial, participants decided whether a stimulus conformed to a given set of rules and rated their confidence in that judgment. We identified participants who performed at chance on the discrimination task, utilizing a subset of their responses, and then assessed the accuracy and the confidence-accuracy relationship of their remaining responses. Analyses revealed above-chance metacognition among participants who did not exhibit decision accuracy. This important new phenomenon, which we term blind insight, poses critical challenges to prevailing models of metacognition grounded in signal detection theory.

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The Floor Is Nearer Than the Sky: How Looking Up or Down Affects Construal Level

Anneleen Van Kerckhove, Maggie Geuens & Iris Vermeir
Journal of Consumer Research, forthcoming

Abstract:
This research shows that consumers select a different product when they look down versus up. Because (1) people are accustomed to looking down to process nearby stimuli and to looking up to process distant stimuli, and because (2) perceived distance is linked to concrete versus abstract processing, the association between moving one’s eyes or head down or up and concrete versus abstract processing has become overgeneralized. A series of three experiments highlights that downward (upward) head and eye movements evoke more concrete (abstract) processing because downward (upward) head or eye movements have come to serve as a proximity (distance) cue. Two additional experiments indicate downstream behavioral consequences of moving one’s eyes or head down versus up. Consumers choose more for feasible versus desirable products when looking down and vice versa when looking up. They also tend to be more preference consistent when looking down versus up.

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Unconscious discrimination of social cues from eye whites in infants

Sarah Jessen & Tobias Grossmann
Proceedings of the National Academy of Sciences, 11 November 2014, Pages 16208–16213

Abstract:
Human eyes serve two key functions in face-to-face social interactions: they provide cues about a person’s emotional state and attentional focus (gaze direction). Both functions critically rely on the morphologically unique human sclera and have been shown to operate even in the absence of conscious awareness in adults. However, it is not known whether the ability to respond to social cues from scleral information without conscious awareness exists early in human ontogeny and can therefore be considered a foundational feature of human social functioning. In the current study, we used event-related brain potentials (ERPs) to show that 7-mo-old infants discriminate between fearful and nonfearful eyes (experiment 1) and between direct and averted gaze (experiment 2), even when presented below the perceptual threshold. These effects were specific to the human sclera and not seen in response to polarity-inverted eyes. Our results suggest that early in ontogeny the human brain detects social cues from scleral information even in the absence of conscious awareness. The current findings support the view that the human eye with its prominent sclera serves critical communicative functions during human social interactions.

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Hunger moderates the activation of psychological disease avoidance mechanisms

Sarah Ainsworth & Jon Maner
Evolutionary Behavioral Sciences, October 2014, Pages 303-313

Abstract:
Humans evolved to possess psychological mechanisms that help them avoid coming into contact with infectious diseases. Those mechanisms promote vigilance to and avoidance of disease cues, including heuristic cues displayed by other people (e.g., old age, obesity). The current research demonstrated that hunger — a state that sensitizes people to the presence of foodborne pathogens — moderated the activation of psychological disease avoidance mechanisms. In 2 experiments, hunger moderated the effect of pathogen priming on responses to social disease cues. A pathogen prime led participants who were subjectively hungry (Experiment 1) and who had abstained from eating for 5 hr (Experiment 2) to display heightened disease avoidance responses, including increases in overt prejudice (Experiment 1) and biases toward categorizing targets into groups heuristically associated with disease (the obese and the elderly). These findings highlight the functional interplay between psychological and physiological processes in helping people avoid disease. Findings also have implications for identifying subtle sources of social prejudice.

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Hearing a statement now and believing the opposite later

Teresa Garcia-Marques et al.
Journal of Experimental Social Psychology, January 2015, Pages 126–129

Abstract:
Existing findings on the truth effect could be explained by recollection of the statements presented in the exposure phase. In order to examine a pure fluency account of this effect, we tested a unique prediction that could not be derived from recollection of a statement. In one experiment, participants judged the truth of a statement that had the same surface appearance as a statement presented earlier but contradicted it, for example “crocodiles sleep with their eyes open” one week after having heard “crocodiles sleep with their eyes closed”. We predicted and found that participants judged contradictory statements as being more false than new statements after a delay of only a few minutes, but judged them as more likely to be true after one week. In contrast to earlier findings, this result cannot be explained by accounts relying on recollection of the previously presented statements.

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Always Gamble on an Empty Stomach: Hunger Is Associated with Advantageous Decision Making

Denise de Ridder et al.
PLoS ONE, October 2014

Abstract:
Three experimental studies examined the counterintuitive hypothesis that hunger improves strategic decision making, arguing that people in a hot state are better able to make favorable decisions involving uncertain outcomes. Studies 1 and 2 demonstrated that participants with more hunger or greater appetite made more advantageous choices in the Iowa Gambling Task compared to sated participants or participants with a smaller appetite. Study 3 revealed that hungry participants were better able to appreciate future big rewards in a delay discounting task; and that, in spite of their perception of increased rewarding value of both food and monetary objects, hungry participants were not more inclined to take risks to get the object of their desire. Together, these studies for the first time provide evidence that hot states improve decision making under uncertain conditions, challenging the conventional conception of the detrimental role of impulsivity in decision making.

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The Cool Scent of Power: Effects of Ambient Scent on Consumer Preferences and Choice Behavior

Adriana Madzharov, Lauren Block & Maureen Morrin
Journal of Marketing, forthcoming

Abstract:
The present research examines how ambient scents impact spatial perceptions in retail environments, which in turn influence customers' feelings of power and thus product preference and purchasing behavior. Specifically, the authors demonstrate that in a warm- (versus cool-) scented and thus perceptually more (versus less) socially dense environment, people experience a greater (versus lesser) need for power, which manifests in increased preference for and purchase of premium products and brands. This research extends knowledge on store atmospherics and customer experience management through the effects of ambient scent on spatial perceptions, and builds on recent research on power in choice contexts.

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Unconscious information changes decision accuracy but not confidence

Alexandra Vlassova, Chris Donkin & Joel Pearson
Proceedings of the National Academy of Sciences, 11 November 2014, Pages 16214–16218

Abstract:
The controversial idea that information can be processed and evaluated unconsciously to change behavior has had a particularly impactful history. Here, we extend a simple model of conscious decision-making to explain both conscious and unconscious accumulation of decisional evidence. Using a novel dichoptic suppression paradigm to titrate conscious and unconscious evidence, we show that unconscious information can be accumulated over time and integrated with conscious elements presented either before or after to boost or diminish decision accuracy. The unconscious information could only be used when some conscious decision-relevant information was also present. These data are fit well by a simple diffusion model in which the rate and variability of evidence accumulation is reduced but not eliminated by the removal of conscious awareness. Surprisingly, the unconscious boost in accuracy was not accompanied by corresponding increases in confidence, suggesting that we have poor metacognition for unconscious decisional evidence.

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Competitive Interaction Leads to Perceptual Distancing Between Actors

Laura Thomas, Christopher Davoli & James Brockmole
Journal of Experimental Psychology: Human Perception and Performance, forthcoming

Abstract:
People physically distance themselves from competitors and the disliked, and cooperate less with those who are further away. We examine whether social interaction can also impact the space people perceive between themselves and others by measuring the influence of competitive dynamics on visual perception. In 2 experiments, participants played a ball toss game until they reached a target score. In Experiment 1, a confederate stood across the room from the participant and either (a) played the same game competitively, (b) played the same game cooperatively, or (c) observed the participant without playing, while in Experiment 2, 2 participants played the same versions of the game with each other. After the game, participants provided an estimate of the distance between themselves and the other player. Participants in Experiment 1 who competed with the confederate consistently judged her to be more distant than participants who cooperated with the confederate or played alone. In Experiment 2, players who lost the competition perceived more distance between themselves and their opponents than did players who won, suggesting that the experience of losing a competition drives this perceptual distancing. These findings demonstrate the power of a socially distancing interaction to create perceptual distance between people.

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Violent and Sexual Media Impair Second-Language Memory during Encoding and Retrieval

Robert Lull, Yakup Çetin & Brad Bushman
Journal of Experimental Social Psychology, January 2015, Pages 172–178

Abstract:
Research suggests that exposure to media containing violence and sex impairs attention and memory. Learning a foreign language is one domain in which attention and memory are critical. Two experiments addressed whether exposure to media containing violence and sex interferes with foreign-language performance. Turkish participants (NExperiment 1 = 70, NExperiment 2 = 76) completed a foreign-language performance task before and after viewing a video. By random assignment, participants watched either a video containing violence and sex or a video containing no violence or sex. In both experiments, the two groups did not differ on pretest performance, but participants exposed to violence and sex performed worse on the posttest (Experiment 1: English; Experiment 2: Spanish), and on a delayed test one-week later (Experiment 2). These results suggest that participants exposed to violence and sex allocated attentional resources to violent and sexual cues in their videos rather than to the foreign language material.

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Embodied effects are moderated by situational cues: Warmth, threat, and the desire for affiliation

Adam Fay & Jon Maner
British Journal of Social Psychology, forthcoming

Abstract:
Recent research demonstrates fundamental links between low-level bodily states and higher order psychological processes. How those links interact with the surrounding social context, however, is not well-understood. Findings from two experiments indicate that the psychological link between physical warmth and social affiliation depends on the situation in which the warmth is experienced. Participants who had been primed with physical threat (as compared with control conditions) responded to warmth with stronger increases in affiliative motivation. This effect replicated across different threat and warmth primes. These findings support a view in which physical sensations interact dynamically with aspects of the immediate situation to influence the activation and application of higher order social processes. This view implies that many embodied psychological processes could function to help people respond adaptively to situational threats and opportunities.

By KEVIN LEWIS | 09:00:00 AM

Friday, November 14, 2014

Running the show

What’s a Dog Story Worth?

Matthew Atkinson, Maria Deam & Joseph Uscinski
PS: Political Science & Politics, October 2014, Pages 819-823

Abstract:
Journalists consider the importance of events and the audience’s interest in them when deciding on which events to report. Events most likely to be reported are those that are both important and can capture the audience’s interest. In turn, the public is most likely to become aware of important news when some aspect of the story piques their interest. We suggest an efficacious means of drawing public attention to important news stories: dogs. Examining the national news agenda of 10 regional newspapers relative to that of the New York Times, we evaluated the effect of having a dog in a news event on the likelihood that the event is reported in regional newspapers. The “dog effect” is approximately equivalent to the effect of whether a story warrants front- or back-page national news coverage in the New York Times. Thus, we conclude that dogs are an important factor in news decisions.

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Congressional Cohorts: The House Republican Class of 2010

Lawrence Evans
The Forum, October 2014, Pages 541–561

Abstract:
As a result of its size and close ties to the Tea Party movement, the freshman cohort of House Republicans elected in 2010 had a significant impact on the chamber. Compared to other Republicans, the districts the freshmen represented did not tilt more toward the GOP or the Tea Party, nor was their roll call ideology during 2011–2012 statistically distinguishable from that of their more senior colleagues. For votes that were Tea Party priorities, however, the effects of freshman status were often large. And the most consequential impact of the class was over party strategy and agenda. The role played by the 2010 House freshmen has implications for how we should think about party influence in Congress.

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Backward Induction in the Wild: Evidence from the U.S. Senate

Jörg Spenkuch
Northwestern University Working Paper, September 2014

Abstract:
Backward induction is a cornerstone of modern game theory. Yet, laboratory experiments consistently show that subjects fail to properly backward induct. Whether these findings generalize to other, real-world settings remains an open question. This paper develops a simple model of sequential voting in the U.S. Senate that allows for a straightforward test of the null hypothesis of myopic play. Exploiting quasi-random variation in the alphabetical composition of the Senate and, therefore, the order in which Senators get to cast their votes, the evidence suggests that agents do rely on backward reasoning. At the same time, Senators' backward induction prowess appears to be quite limited. In particular, there is no evidence of Senators reasoning backwards on the first several hundred roll call votes in which they participate.

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Storable Votes and Judicial Nominations in the U.S. Senate

Alessandra Casella, Sébastien Turban & Gregory Wawro
Columbia University Working Paper, September 2014

Abstract:
We model a procedural reform aimed at restoring a proper role for the minority in the confirmation process of judicial nominations in the U.S. Senate. We propose that nominations to the same level court be collected in periodic lists and voted upon individually with Storable Votes, allowing each senator to allocate freely a fixed number of total votes. Although each nomination is decided by simple majority, storable votes make it possible for the minority to win occasionally, but only when the relative importance its members assign to a nomination is higher than the relative importance assigned by the majority. Numerical simulations, motivated by a game theoretic model, show that under plausible assumptions a minority of 45 senators would be able to block between 20 and 35 percent of nominees. For most parameter values, the possibility of minority victories increases aggregate welfare.

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The Seventeenth Amendment, Senate ideology and the growth of government

Danko Tarabar & Joshua Hall
Applied Economics Letters, forthcoming

Abstract:
The Seventeenth Amendment disturbed the existing electoral system in the United States by requiring direct elections for state Senators. Scholars have argued this made the Senate more populist and contributed to the growth of government in the US post-1913. We employ econometric tools to investigate whether the mean ideology of the Senate and its winning policies experienced a structural change around the time of the enactment. We find no compelling evidence of a structural break at that time but do find some evidence for a change in the mid-to-late 1890s.

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Foreign Junkets or Learning to Legislate? Generational Changes in the International Travel Patterns of House Members, 1977–2012

Alexander Alduncin et al.
The Forum, October 2014, Pages 563–577

Abstract:
In the aftermath of the polarization that has taken hold in Congress, some have pointed to the changing social connectedness of Congressional members as a possible cause, effect, or both. In this article, we take an initial look at this element of the story by analyzing one aspect of change over time in what are known as CODELs. We outline our data collection of these foreign trips taken by House members in two distinct periods and show how the use, users, and locations of these trips have changed. Among other changes, we find that more members are traveling than in the past, but that these trips are on average much shorter in duration. As a result, members of Congress are spending less time together during foreign travel, potentially reducing the opportunities for building relationships among them.

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Lame Ducks And The Media

Oliver Latham
Economic Journal, forthcoming

Abstract:
Do media organisations turn on unpopular governments and, if so, why? We model a demand-side and supply-side explanation and derive testable implications that can be used to differentiate between them. We take these predictions to the data by examining whether British newspapers give more coverage to investigations into government MPs when the government is behind in the polls. Instrumenting for poll leads with plausibly-exogenous macroeconomic variables we find that a one standard deviation increase in a government's poll lead leads to a 30 to 60% decline in coverage. We also find suggestive evidence that this effect is demand driven.

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The Effect of the Internet on Newspaper Readability

Abdallah Salami & Robert Seamans
NYU Working Paper, September 2014

Abstract:
How has the Internet affected newspaper content? We build a dataset that matches newspaper readability measures ["the level of education required in order to comprehend a written text"] to Internet penetration at the county-year level from 2000-2008. We document a positive relationship between Internet penetration and newspaper readability. This result appears remarkably robust. The relationship is evident in non-parametric graphs of the raw data, annual cross-sections and panel data models. Our cross section results rely on an instrumental variables approach that uses lightning strikes to instrument for Internet penetration. Thus, contrary to a commonly held belief that the Internet is "dumbing down" content, we find evidence supporting the opposite hypothesis: newspaper content appears to be getting more sophisticated in response to increased Internet penetration.

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Dynamic Representation in the American States, 1960–2012

Devin Caughey & Chris Warshaw
MIT Working Paper, October 2014

Abstract:
One of the most fundamental assumptions of democratic theory is that the views of citizens should influence government policy decisions. Previous studies have found a strong cross-sectional relationship between public opinion and state policy outputs. But the ultimate metric of responsiveness is the extent to which changes in popular preferences cause changes in public policies. In this paper, we reassess the quality of representation in the American states over the past half century using a large battery of historical evidence and new statistical techniques. We show that changes in the mass public’s policy views are associated with changes in state policy outputs. In addition, we evaluate the influence of institutions, such as direct democracy, term limits, and legislative professionalism. We find that term limits increase responsiveness, but legislative professionalism and direct democracy have no consistent impact on responsiveness. Our findings have large implications for both the study of representation and institutions in the American states.

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Cost-Benefit Analysis and Agency Independence

Michael Livermore
University of Chicago Law Review, Spring 2014, Pages 609-688

Abstract:
The presidential mandate that agency rule makings be subjected to cost-benefit analysis and regulatory review is one of the most controversial developments in administrative law over the past several decades. There is a prevailing view that the role of cost-benefit analysis in the executive branch is to help facilitate control of agencies by the Office of Information and Regulatory Affairs (OIRA). This Article challenges that view, arguing that cost-benefit analysis in fact helps preserve agency autonomy in the face of oversight. This effect stems from the constraints imposed on reviewers by the regularization of cost-benefit-analysis methodology and the fact that agencies have played a major role in shaping that methodology. The autonomy-preserving effect of cost-benefit analysis has been largely ignored in debates over the institution of regulatory review. Ultimately, cost-benefit analysis has ambiguous effects on agency independence, simultaneously preserving, informing, and constraining agency power.

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Popular Presidents Can Affect Congressional Attention, for a Little While

John Lovett, Shaun Bevan & Frank Baumgartner
Policy Studies Journal, forthcoming

Abstract:
Does the president have the ability to set the congressional agenda? Agenda setting is a prerequisite for influence, so this is an important element in understanding presidential–legislative relations. We focus on the State of the Union address and show that popular presidents can, indeed, cause Congress to shift attention to those topics most emphasized. The impact is tempered by divided government and time, however. No matter the state of divided government, however, popular presidents can direct congressional attention, at least for a little while. Unpopular presidents, by contrast, are irrelevant.

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Who is Empowering Who: Exploring the Causal Relationship Between Descriptive Representation and Black Empowerment

Shane Gleason & Christopher Stout
Journal of Black Studies, October 2014, Pages 635-659

Abstract:
Previous studies of descriptive representation have not been able to overcome the classic endogeniety problem. For example, do Black elected officials cause Blacks to be more empowered? Or are Black politicians only elected in contexts where Blacks are already empowered? We address this shortcoming by utilizing genetic matching and the 1996 National Black Election Study. Genetic matching creates a pseudo-experimental environment where Blacks in districts with Black elected officials are matched with similarly situated Blacks in districts without Black representation. This research design allows us to better assess the causality of descriptive representation and changes in political attitudes. This study provides strong evidence that higher levels of efficacy are a result of descriptive representation, rather than the cause of it. Thus, our study demonstrates Black office-holding at the congressional level empowers the Black electorate.

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Changing Deliberative Norms on News Organizations' Facebook Sites

Natalie (Talia) Jomini Stroud et al.
Journal of Computer-Mediated Communication, forthcoming

Abstract:
Comments posted to news sites do not always live up to the ideals of deliberative theorists. Drawing from theories about deliberation and group norms, this study investigates whether news organizations can affect comment section norms by engaging directly with commenters. We conducted a field study with a local television station in a top-50 Designated Market Area. For 70 political posts made on different days, we randomized whether an unidentified staff member from the station, a recognizable political reporter, or no one engaged with commenters. We assessed if these changes affected whether the comments (n = 2,403) were civil, were relevant, contained genuine questions, and provided evidence. The findings indicate that a news organization can affect the deliberative behavior of commenters.

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Fail-Safe Federalism

Sanford Gordon & Dimitri Landa
NYU Working Paper, September 2014

Abstract:
We explore the consequences for social welfare and the national political conflict of several key institutional features of federalism in the United States: supermajoritarian national institutions and permeable boundaries in the provision of by national and state governments, where the actions by the former can crowd out the latter. States with high demand for public good provision are better positioned to adjust state-level policies to accommodate local demand in the presence of low national provision than corresponding states with low demand in the presence of high national provision. This asymmetry implies that the level of federal provision preferred by moderate-demanders may be socially inefficient, and can exacerbate political polarization when national provision is gridlocked at a high level. Symmetric cross-state negative externalities can reduce conflict at the national level by generating consensus for national action; whereas positive externalities, or asymmetric negative externalities, can increase it. We also explore how, in a dynamic setting, exogenous shocks to demand can create inefficiencies while expanding the "gridlock interval" of national policies; and the limits of Coaseian bargaining over national public goods.

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The impact of government form on e-participation: A study of New Jersey municipalities

Yueping Zheng, Hindy Lauer Schachter & Marc Holzer
Government Information Quarterly, October 2014, Pages 653–659

Abstract:
During the past two decades, governments have started to use information and communication technologies (ICT) to offer a new forum for citizen involvement known as e-participation. The rapid development of e-participation has been attracting attention from many researchers. While a growing body of research has explored various factors impacting e-participation, few studies have examined the influence of government structures on the e-participation opportunities that jurisdictions offer users. To fill the research gap and begin investigating this relationship, we use data from 97 New Jersey municipalities to analyze the impact on e-participation of three local government structures: mayor-council, council-manager, and township. The results show that municipalities with the mayor-council form of government are more likely to have higher levels of e-participation offerings. We argue that the role of an elected executive in this structure facilitates the will to provide greater opportunities for citizens to participate online.

By KEVIN LEWIS | 09:00:00 AM

Thursday, November 13, 2014

Seizing the equal opportunity

Digit ratio (2D:4D) and gender inequalities across nations

John Manning, Bernhard Fink & Robert Trivers
Evolutionary Psychology, Fall 2014, Pages 757-768

Abstract:
Gender inequality varies across nations, where such inequality is defined as the disproportionate representation of one sex over the other in desirable social, economic, and biological roles (typically male over female). Thus in Norway, 40% of parliamentarians are women, in the USA 17%, and in Saudi Arabia 0%. Some of this variation is associated with economic prosperity but there is evidence that this cause and effect can go in either direction. Here we show that within a population the average ratio of index (2D) to ring (4D) finger lengths (2D:4D) — a proxy measure of the relative degree to which offspring is exposed in utero to testosterone versus estrogen — is correlated with measures of gender inequality between nations. We compared male and female 2D:4D ratios to female parliamentary representation, labor force participation, female education level, maternal mortality rates, and juvenile pregnancy rates per nation in a sample of 29 countries. We found those nations who showed higher than expected female fetal exposure to testosterone (low 2D:4D) and lower than expected male exposure to fetal testosterone (high 2D:4D) had higher rates of female parliamentary representation, and higher female labor force participation. In short, the more similar the two sexes were in 2D:4D, the more equal were the two sexes in parliamentary and labor force participation. The other variables were not as strongly correlated. We suggest that higher than expected fetal testosterone in females and lower fetal testosterone in males may lead to high female representation in the national labor force and in parliament.

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Of Age, Sex, and Money: Insights from Corporate Officer Compensation on the Wage Inequality Between Genders

David Newton & Mikhail Simutin
Management Science, forthcoming

Abstract:
This paper shows that the gender and age of the wage setter are crucial determinants of the disparity in wages between sexes. We document our findings using a data set on compensation of corporate officers that is uniquely suited for this analysis because officer wages are set by chief executive officers (CEOs). We show that CEOs pay officers of the opposite gender less than officers of their own gender, even when controlling for job characteristics. Older and male CEOs exhibit the greatest propensity to differentiate on the basis of sex. Female officers receive smaller raises if the firm is headed by a man. Our results suggest that CEO gender and age are economically more important determinants of officer compensation than are firm stock performance, stock volatility, or return on assets.

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Rethinking the Two-Body Problem: The Segregation of Women Into Geographically Dispersed Occupations

Alan Benson
Demography, October 2014, Pages 1619-1639

Abstract:
Empirical research on the family cites the tendency for couples to relocate for husbands’ careers as evidence against the gender neutrality of household economic decisions. For these studies, occupational segregation is a concern because occupations are not random by sex and mobility is not random by occupation. I find that the tendency for households to relocate for husbands’ careers is better explained by the segregation of women into geographically dispersed occupations rather than by the direct prioritization of men’s careers. Among never-married workers, women relocate for work less often than men, and the gender effect disappears after occupational segregation is accounted for. Although most two-earner families feature husbands in geographically clustered jobs involving frequent relocation for work, families are no less likely to relocate for work when it belongs to the wife. I conclude that future research in household mobility should treat occupational segregation occurring prior to marriage rather than gender bias within married couples as the primary explanation for the prioritization of husbands’ careers in household mobility decisions.

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Life Paths and Accomplishments of Mathematically Precocious Males and Females Four Decades Later

David Lubinski, Camilla Benbow & Harrison Kell
Psychological Science, forthcoming

Abstract:
Two cohorts of intellectually talented 13-year-olds were identified in the 1970s (1972–1974 and 1976–1978) as being in the top 1% of mathematical reasoning ability (1,037 males, 613 females). About four decades later, data on their careers, accomplishments, psychological well-being, families, and life preferences and priorities were collected. Their accomplishments far exceeded base-rate expectations: Across the two cohorts, 4.1% had earned tenure at a major research university, 2.3% were top executives at “name brand” or Fortune 500 companies, and 2.4% were attorneys at major firms or organizations; participants had published 85 books and 7,572 refereed articles, secured 681 patents, and amassed $358 million in grants. For both males and females, mathematical precocity early in life predicts later creative contributions and leadership in critical occupational roles. On average, males had incomes much greater than their spouses’, whereas females had incomes slightly lower than their spouses’. Salient sex differences that paralleled the differential career outcomes of the male and female participants were found in lifestyle preferences and priorities and in time allocation.

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Phenotyping and Adolescence-to-Adulthood Transitions Among Latinos

Igor Ryabov & Franklin Goza
Race and Social Problems, December 2014, Pages 342-355

Abstract:
Phenotyping the system of prejudice and discrimination, which gives preference to European physical characteristics and devalues those of Amerindians, Africans, and Asians, affects the lives of many Latinos in the United States. This study examines the impact of phenotyping on academic and employment outcomes among Latino adolescents/young adults. Outcomes examined include the odds of graduating from high school, finding full-time employment after completing high school, and attending college. Socioeconomic status (measured at individual and school levels), family structure, quality of parent–child relationships, immigrant generational status, and other measures are included as controls. Multilevel modeling and logistic regression are utilized as analytical tools. Results indicate that, among Latinos, light skin and blue eyes are associated with better academic outcomes than having dark skin and brown eyes, while those with darker skin enter the labor market earlier than their light-skinned co-ethnics.

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Social externalities, overlap and the poverty trap

Young-Chul Kim & Glenn Loury
Journal of Economic Inequality, December 2014, Pages 535-554

Abstract:
Previous studies find that some social groups are stuck in poverty traps because of network effects. However, these studies do not carefully analyze how these groups overcome low human capital investment activities. Unlike previous studies, the model in this paper includes network externalities in both the human capital investment stage and the subsequent career stages. This implies that not only the current network quality, but also the expectations about future network quality affect the current investment decision. Consequently, the coordinated expectation among the group members can play a crucial role in the determination of the final state. We define “overlap” for some initial skill ranges, whereby the economic performance of a group can be improved simply by increasing expectations of a brighter future. We also define “poverty trap” for some ranges, wherein a disadvantaged group is constrained by its history, and we explore the egalitarian policies to mobilize the group out of the trap.

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Does Class Size Affect the Gender Gap? A Natural Experiment in Law

Daniel Ho & Mark Kelman
Journal of Legal Studies, June 2014, Pages 291-321

Abstract:
We study a unique natural experiment in which Stanford Law School randomly assigned first-year students to small or large sections of mandatory courses from 2001 to 2011. We provide evidence that assignment to small sections closed a slight (but substantively and highly statistically significant) gender gap existing in large sections from 2001 to 2008; that reforms in 2008 that modified the grading system and instituted small graded writing and simulation-intensive courses eliminated the gap entirely; and that women, if anything, outperformed men in small simulation-based courses. Our evidence suggests that pedagogical policy — particularly small class sizes — can reduce, and even reverse, achievement gaps in postgraduate education.

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Creativity from Constraint? How Political Correctness Influences Creativity in Mixed-Sex Work Groups

Jack Goncalo et al.
Administrative Science Quarterly, forthcoming

Abstract:
Most group creativity research is premised on the assumption that creativity is unleashed by removing normative constraints. As work organizations become increasingly diverse in terms of gender, however, this assumption needs to be reconsidered since mixed-sex interactions carry a high risk of offense. Departing from the assumption that normative constraints necessarily stifle creativity, we develop a theoretical perspective in which creativity in mixed-sex groups is enhanced by imposing a norm to be politically correct (PC) — a norm that sets clear expectations for how men and women should interact with one another. We present evidence from two group experiments showing that the PC norm promotes rather than suppresses members’ free expression of ideas by reducing the uncertainty they experience in mixed-sex work groups. These results highlight a paradoxical consequence of the PC norm: A term that has been used to undermine expectations to censor offensive language as a threat to free speech actually provides a normative foundation upon which demographically heterogeneous work groups can freely exchange creative ideas. We discuss the implications of our findings for managing creativity in diverse groups and under conditions of uncertainty, and the counterintuitive role that normative constraints play in that process.

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Women and Power: Unpopular, Unwilling, or Held Back?

Pablo Casas-Arce & Albert Saiz
Journal of Political Economy, forthcoming

Abstract:
We use Spain’s Equality Law, which mandates a 40 percent female quota on electoral lists, to test for the existence of agency problems between party leaders and their constituents regarding women’s political representation. The law was enacted by the Social-Democratic Party after the surprise parliamentary electoral results following the Madrid terrorist bombings in 2004. It was therefore completely unexpected by local political organizations. The quota only applied to towns with populations above 5,000 and forced heterogeneous growth in the number of female candidates by party. Using pre- and post-quota data by party and municipality, we implement a triple-difference design and find that female quotas resulted in slightly better electoral results for the parties that started out with fewer women, and hence were most affected by the quota. Our evidence suggests the existence of agency problems that hinder female representation in political institutions, because party leaders were not maximizing electoral results prior to the introduction of the quota.

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Cytokine responses and math performance: The role of stereotype threat and anxiety reappraisals

Neha John-Henderson, Michelle Rheinschmidt & Rodolfo Mendoza-Denton
Journal of Experimental Social Psychology, January 2015, Pages 203–206

Abstract:
This research independently manipulated two potential attenuators of stereotype threat – reappraisal of anxiety and test framing – to explore their independent and combined effects. Female participants took a difficult math exam that was described as gender-biased or gender-fair and were told that anxious arousal could positively impact performance or were given no information regarding arousal. Levels of the cytokine Interleukin-6 (IL-6), an immune marker of inflammation, were measured in oral mucosal transudate (OMT) both before and after the exam. Our findings indicate that directing reappraisal of physiological arousal attenuated increases in IL-6 across test framing conditions, and was especially effective under stereotype threat (i.e., gender-biased test condition). Reappraisal also mapped onto better test performance in the threat condition. Together, these findings provide insight into the unique and interactive effects of two situational interventions meant to reduce stereotype threat, indexed here by both physiological and performance-based correlates of threat.

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Executive Gender Pay Gaps: The Roles of Board Diversity and Female Risk Aversion

Mary Ellen Carter, Francesca Franco & Mireia Gine
Boston College Working Paper, October 2014

Abstract:
Prior research finds mixed evidence about whether a pay gap exists between female and male executives. We examine trends in gender pay gaps and explore gender bias in the boardroom and female executives’ appetite for compensation risk as possible explanations for these gaps. Using ExecuComp and RiskMetrics data from 1996-2010, we find evidence that female executives receive significantly lower compensation levels than males but that greater female representation on boards mitigates these gaps. We also find evidence that females accept pay packages with lower compensation incentives. Unlike the gaps in compensation levels, the incentives gaps do not change over time nor does gender diversity on the board reduce these gaps. These findings are consistent with gender-specific risk aversion, as captured by ex-post equity incentives, being an innate characteristic that is not mitigated by board diversity.

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Affirmative Action and Stereotypes in Higher Education Admissions

Prasad Krishnamurthy & Aaron Edlin
NBER Working Paper, October 2014

Abstract:
We analyze how admission policies affect stereotypes against students from disadvantaged groups. Many critics of affirmative action argue that lower admission standards cause such stereotypes and suggest group-blind admissions as a remedy. We show that when stereotypes result from social inequality, they can persist under group-blind admissions. In such cases, eliminating stereotypes perversely requires a higher admission standard for disadvantaged students. If a school seeks both to treat students equally and limit stereotypes, the optimal admission policy would still impose a higher standard on disadvantaged students. A third goal, such as equal representation, is required to justify group-blind admissions. Even when there is such a third goal, group-blind admissions are optimal only when the conflicting goals of equal representation and limiting stereotypes exactly balance. This is an implausible justification for group-blind admission because it implies that some schools desire higher standards for disadvantaged students. Schools that do not desire such higher standards will typically find some amount of affirmative action to be optimal.

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Unintended Effects of Anonymous Resumes

Luc Behaghel, Bruno Crepon & Thomas Le Barbanchon
American Economic Journal: Applied Economics, forthcoming

Abstract:
We evaluate an experimental program in which the French public employment service anonymized resumes for firms that were hiring. Firms were free to participate or not; participating firms were then randomly assigned to receive either anonymous resumes or name-bearing ones. We find that participating firms become less likely to interview and hire minority candidates when receiving anonymous resumes. We show how these unexpected results can be explained by the self-selection of firms into the program and by the fact that anonymization prevents the attenuation of negative signals when the candidate belongs to a minority.

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Gender Differences in the Willingness to Compete Emerge Early in Life and Persist

Matthias Sutter & Daniela Glätzle-Rützler
Management Science, forthcoming

Abstract:
Gender differences in the willingness to compete have been identified as one important factor in explaining gender differences in labor markets and within organizations. We present three experiments with a total of 1,570 subjects, ages three to 18 years, to investigate the origins of this gender gap. In a between-subjects design we find that boys are more likely to compete than girls as early as kindergarten and that this gap prevails throughout adolescence. Re-examining the behavior of 316 subjects in a within-subjects design two years later, we show that these gender differences also largely persist over a longer time period and can thus be considered stable. Controlling for subjects' abilities in the different tasks, their risk attitudes, and expected performance, the gender gap in the willingness to compete is estimated in the range of 10–20 percentage points. We discuss the implications of our findings for policy interventions and organizational management.

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Women’s Representation in Science Predicts National Gender-Science Stereotypes: Evidence From 66 Nations

David Miller, Alice Eagly & Marcia Linn
Journal of Educational Psychology, forthcoming

Abstract:
In the past 40 years, the proportion of women in science courses and careers has dramatically increased in some nations but not in others. Our research investigated how national differences in women’s science participation related to gender-science stereotypes that associate science with men more than women. Data from ∼350,000 participants in 66 nations indicated that higher female enrollment in tertiary science education (community college or above) related to weaker explicit and implicit national gender-science stereotypes. Higher female employment in the researcher workforce related to weaker explicit, but not implicit, gender-science stereotypes. These relationships remained after controlling for many theoretically relevant covariates. Even nations with high overall gender equity (e.g., the Netherlands) had strong gender-science stereotypes if men dominated science fields specifically. In addition, the relationship between women’s educational enrollment in science and implicit gender-science stereotypes was stronger for college-educated participants than participants without college education. Implications for instructional practices and educational policies are discussed.

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The “State” of Equal Employment Opportunity Law and Managerial Gender Diversity

Julie Kmec & Sheryl Skaggs
Social Problems, November 2014, Pages 530-558

Abstract:
Women’s underrepresentation in management is a persistent social problem. We take a new approach to understanding the lack of managerial gender diversity by investigating how U.S. state equal employment opportunity laws are related to women’s presence in upper and lower management. We draw on data from 2010 EEO-1 reports documenting managerial sex composition in U.S. work establishments and a state employment law database to answer our research questions. State mandates are found to be differentially associated with upper- versus lower-level managerial gender diversity. Establishments in states with an equal pay law, or that once ratified the ERA, employ more women in upper management than those in states without such a law or in nonratifying states, but this holds only in establishments in industries that typically employ women. In contrast, establishments in states that require anti-discrimination workplace postings employ fewer women in upper-management than those in states without such a requirement. State equal pay laws, especially those adopted before federal equal pay legislation, family responsibility discrimination protections, and past ERA ratification are positively associated with women’s lower-level managerial presence. Conversely, state expanded family and medical leave coverage, prohibited sex discrimination, and specific posting rules are negatively associated with women’s presence in lower management. Results hold net of establishment, state, firm, and industry factors. We discuss the meaning behind differences across managerial level and the role of state regulation in moving toward greater managerial gender equity.

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Gender Pay Gap and Employment Sector: Sources of Earnings Disparities in the United States, 1970–2010

Hadas Mandel & Moshe Semyonov
Demography, October 2014, Pages 1597-1618

Abstract:
Using data from the IPUMS-USA, the present research focuses on trends in the gender earnings gap in the United States between 1970 and 2010. The major goal of this article is to understand the sources of the convergence in men’s and women’s earnings in the public and private sectors as well as the stagnation of this trend in the new millennium. For this purpose, we delineate temporal changes in the role played by major sources of the gap. Several components are identified: the portion of the gap attributed to gender differences in human-capital resources; labor supply; sociodemographic attributes; occupational segregation; and the unexplained portion of the gap. The findings reveal a substantial reduction in the gross gender earnings gap in both sectors of the economy. Most of the decline is attributed to the reduction in the unexplained portion of the gap, implying a significant decline in economic discrimination against women. In contrast to discrimination, the role played by human capital and personal attributes in explaining the gender pay gap is relatively small in both sectors. Differences between the two sectors are not only in the size and pace of the reduction but also in the significance of the two major sources of the gap. Working hours have become the most important factor with respect to gender pay inequality in both sectors, although much more dominantly in the private sector. The declining gender segregation may explain the decreased impact of occupations on the gender pay gap in the private sector. In the public sector, by contrast, gender segregation still accounts for a substantial portion of the gap. The findings are discussed in light of the theoretical literature on sources of gender economic inequality and in light of the recent stagnation of the trend.

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Bias in the Legal Profession: Self-Assessed versus Statistical Measures of Discrimination

Heather Antecol, Deborah Cobb-Clark & Eric Helland
Journal of Legal Studies, June 2014, Pages 323-357

Abstract:
Legal cases are won or lost on the basis of statistical discrimination measures, but workers’ perceptions of discriminatory behavior are important for understanding labor supply decisions. Workers who believe that they have been discriminated against are more likely to leave their employers, and workers’ perceptions of discrimination likely drive formal complaints to the Equal Employment Opportunity Commission. Yet the relationship between statistical and self-assessed measures of discrimination is far from obvious. We expand on the previous literature by using data from the After the J.D. study to compare standard Blinder-Oaxaca measures of earnings discrimination to self-reported measures of client discrimination, other work-related discrimination, and harassment. Our results indicate that conventional measures of earnings discrimination are not closely linked to the racial and gender bias that new lawyers believe they have experienced on the job. Moreover, statistical earnings discrimination does not explain the disparity in self-assessed bias across gender and racial groups.

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Inequality in Skill Development on College Campuses

Josipa Roksa
Research in Social Stratification and Mobility, forthcoming

Abstract:
While patterns of inequality in access and attainment in higher education are well documented, sociologists have left largely unexplored the question of disparities in skill development during college. Following a cohort of students across 23 four-year institutions from entry into college through their senior year, we examine inequalities in development of general collegiate skills. Findings indicate that despite unequal starting points, students from less educated families gain skills at the same rate as those from more educated families. African-American students, in contrast, enter college with lower levels of general collegiate skills than their white peers and gain less over time. A substantial portion, but not all, of the African-American/white gap in general collegiate skills is explained by academic preparation and selectivity of the institutions attended. Notably, African-American and white students experience similar benefits from being academically prepared and attending more selective institutions. These findings provide valuable insights for research and policy concerned with inequality in higher education.

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Racial Wage Disparity in US Cities

Craig Kerr & Randall Walsh
Race and Social Problems, December 2014, Pages 305-327

Abstract:
This paper estimates the conditional wage gaps between black and white full-time male workers at the metropolitan statistical area (MSA) level using data from the 1990 and 2000 U.S. Censuses. The magnitudes of the wage gaps are found to vary substantially across location. As predicted in Becker's (The economics of discrimination, University of Chicago Press, Chicago, 1957) seminal theory on wage discrimination, we find that the wage gaps are greater in MSAs that have a larger proportion of black workers in the labor force. This is the most consistent result across all specifications and years. We also find the gaps to be greater where there is an overrepresented black population in jail and a more segregated population if the MSA is in the South. The proportion of workers covered by a collective bargaining agreement in the private sector is associated with greater relative black earnings. We find that although the relationship between race and wages has diminished over time as famously suggested in Wilson (The declining significance of race: Blacks and changing American institutions, University of Chicago Press, Chicago, 1978), the significance of race remains.

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Teacher (Mis)Perceptions of Preschoolers’ Academic Skills: Predictors and Associations With Longitudinal Outcomes

Courtney Baker et al.
Journal of Educational Psychology, forthcoming

Abstract:
Preschool teachers have important impacts on children’s academic outcomes, and teachers’ misperceptions of children’s academic skills could have negative consequences, particularly for low-income preschoolers. This study utilized data gathered from 123 preschool teachers and their 760 preschoolers from 70 low-income, racially diverse centers. Hierarchical linear modeling was utilized to account for the nested data structure. Even after controlling for children’s actual academic skill, older children, children with stronger social skills, and children with fewer inattentive symptoms were perceived to have stronger academic abilities. Contrary to hypotheses, preschoolers with more behavior problems were perceived by teachers to have significantly better pre-academic abilities than they actually had. Teachers’ perceptions were not associated with child gender or child race/ethnicity. Although considerable variability was due to teacher-level characteristics, child characteristics explained 42% of the variability in teachers’ perceptions about children’s language and preliteracy ability and 41% of the variability in teachers’ perceptions about math ability. Notably, these perceptions appear to have important impacts over time. Controlling for child baseline academic skill and child characteristics, teacher perceptions early in the preschool year were significantly associated with child academic outcomes during the spring both for language and preliteracy and for math. Study implications with regard to the achievement gap are discussed.

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Sex Hormones and Competitive Bidding

Burkhard Schipper
Management Science, forthcoming

Abstract:
We correlate competitive bidding and profits in symmetric independent private value first-price auctions with salivary testosterone, estradiol, progesterone, and cortisol in more than 200 subjects. Bids are significantly positively correlated and profits are significantly negatively correlated with basal salivary progesterone, but only for females who do not use hormonal contraceptives. Surprisingly, we have null findings for basal testosterone, estradiol, and cortisol for both males and females. We show that our finding for progesterone is not mediated by risk aversion or bidding mistakes. No hormone responds to total profits in the auctions except for a small positive response of the stress hormone cortisol in males.

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A step too far? Leader racism inhibits transgression credit

Dominic Abrams et al.
European Journal of Social Psychology, forthcoming

Abstract:
Prior research established that when in-group leaders commit serious transgressions, such as breaking enforceable rules or engaging in bribery, people treat them leniently compared with similarly transgressive regular group members or out-group leaders (‘transgression credit’). The present studies test a boundary condition of this phenomenon, specifically the hypothesis that transgression credit will be lost if a leader's action implies racist motivation. In study 1, in a corporate scenario, a transgressive in-group leader did or did not express racism. In study 2, in a sports scenario, an in-group or out-group leader or member transgressed rules with or without a racist connotation. Both studies showed that in-group transgressive leaders lost their transgression credit if their transgression included a racial connotation. Wider implications for constraining leaders' transgressions are discussed.

By KEVIN LEWIS | 09:00:00 AM

Wednesday, November 12, 2014

Modernity

Banks and Development: Jewish Communities in the Italian Renaissance and Current Economic Performance

Luigi Pascali
Review of Economics and Statistics, forthcoming

Abstract:
Are differences in local banking development long lasting? Do they affect economic performance? I answer these questions by relying on an historical development that occurred in Italian cities during the Renaissance. A change in Catholic doctrine led to the development of modern banks in those cities hosting Jewish communities. Using Jewish demography in 1500 as an instrument, I provide evidence of (1) extraordinary persistence in the level of banking development across Italian cities (2) substantial effects of local banks on per-capita income. Additional firm-level analyses suggest that banks exert large effects on aggregate productivity by reallocating resources toward more efficient firms.

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Climate and the slave trade

James Fenske & Namrata Kala
Journal of Development Economics, January 2015, Pages 19–32

Abstract:
African societies exported more slaves in colder years. Lower temperatures reduced mortality and raised agricultural yields, lowering slave supply costs. Our results help explain African participation in the slave trade, which predicts adverse outcomes today. We use an annual panel of African temperatures and port-level slave exports to show that exports declined when local temperatures were warmer than normal. This result is strongest where African ecosystems are least resilient to climate change. Cold weather shocks at the peak of the slave trade predict lower economic activity today. We support our interpretation using the histories of Whydah, Benguela, and Mozambique.

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The role of lactase persistence in precolonial development

Justin Cook
Journal of Economic Growth, December 2014, Pages 369-406

Abstract:
This paper argues that a genetic adaptation to the Neolithic Revolution led to differential levels of development in the precolonial era. The ability to digest milk, or to be lactase persistent, is conferred by a gene variant that is unequally distributed across the Old World. Milk provided qualitative and quantitative advantages to the diet that led to differences in the carrying capacities of respective countries. It is shown through a number of specifications that country-level variation in the frequency of lactase persistence is positively and significantly related to population density in 1,500 CE; specifically, a one standard deviation increase in the frequency of lactase persistent individuals (roughly 24 percentage points) is associated with roughly a 40 % increase in precolonial population density. This relationship is robust to a large number of sample specifications and potentially omitted variables.

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Longevity and the Rise of the West: Lifespans of the European Elite, 800-1800

Neil Cummins
London School of Economics Working Paper, September 2014

Abstract:
I analyze the age at death of 121,524 European nobles from 800 to 1800. Longevity began increasing long before 1800 and the Industrial Revolution, with marked increases around 1400 and again around 1650. Declines in violence contributed to some of this increase, but the majority must reflect other changes in individual behavior. The areas of North-West Europe which later witnessed the Industrial Revolution achieved greater longevity than the rest of Europe even by 1000 AD. The data suggest that the 'Rise of the West' originates before the Black Death.

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Why did the Netherlands develop so early? The legacy of the Brethren of the Common Life

Semih Akçomak, Dinand Webbink & Bas ter Weel
Economic Journal, forthcoming

Abstract:
This research establishes a link between the Brethren of the Common Life (BCL), a religious community founded by Geert Groote in Deventer in the late fourteenth century, and the early economic development of the Netherlands. The BCL stimulated human capital accumulation. The historical analyses show that the BCL contributed to the high rates of literacy, to the high level of book production and to city growth in the Netherlands. These findings are supported by a set of OLS regressions and further corroborated by 2SLS estimates that use distance from Deventer as an instrument for the presence of the BCL.

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Indigenous Origins of Colonial Institutions

Luz Marina Arias & Desha Girod
Quarterly Journal of Political Science, Summer 2014, Pages 371-406

Abstract:
What are the origins of colonial forced labor? While extensive research investigates the effects of colonial forced labor on contemporary political and economic development, little is known about the origins of colonial forced labor. Based on historical accounts, we offer a simple formal model that emphasizes constraints facing profit-maximizing colonists. The model provides a novel explanation for colonial forced labor by demonstrating that local and foreign forced labor depended on different factors. Colonists used local, indigenous forced labor when they encountered an indigenous political administration that was already coercing labor. However, colonists used foreign forced labor, like African slavery in the Americas, when indigenous labor was not already organized and natural resources were present. Original data from 439 subnational territories covering the Americas support the hypotheses across a variety of model specifications. This study implies that differences in political and economic development today may predate European colonialism.

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Asia’s little divergence: State capacity in China and Japan before 1850

Tuan-Hwee Sng & Chiaki Moriguchi
Journal of Economic Growth, December 2014, Pages 439-470

Abstract:
This paper explores the role of state capacity in the comparative economic development of China and Japan. Before 1850, both nations were ruled by stable dictators who relied on bureaucrats to govern their domains. We hypothesize that agency problems increase with the geographical size of a domain. In a large domain, the ruler’s inability to closely monitor bureaucrats creates opportunities for the bureaucrats to exploit taxpayers. To prevent overexploitation, the ruler has to keep taxes low and government small. Our dynamic model shows that while economic expansion improves the ruler’s finances in a small domain, it could lead to lower tax revenues in a large domain as it exacerbates bureaucratic expropriation. To check these implications, we assemble comparable quantitative data from primary and secondary sources. We find that the state taxed less and provided fewer local public goods per capita in China than in Japan. Furthermore, while the Tokugawa shogunate’s tax revenue grew in tandem with demographic trends, Qing China underwent fiscal contraction after 1750 despite demographic expansion. We conjecture that a greater state capacity might have prepared Japan better for the transition from stagnation to growth.

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Asiaphoria Meets Regression to the Mean

Lant Pritchett & Lawrence Summers
NBER Working Paper, October 2014

Abstract:
Consensus forecasts for the global economy over the medium and long term predict the world’s economic gravity will substantially shift towards Asia and especially towards the Asian Giants, China and India. While such forecasts may pan out, there are substantial reasons that China and India may grow much less rapidly than is currently anticipated. Most importantly, history teaches that abnormally rapid growth is rarely persistent, even though economic forecasts invariably extrapolate recent growth. Indeed, regression to the mean is the empirically most salient feature of economic growth. It is far more robust in the data than, say, the much-discussed middle-income trap. Furthermore, statistical analysis of growth reveals that in developing countries, episodes of rapid growth are frequently punctuated by discontinuous drop-offs in growth. Such discontinuities account for a large fraction of the variation in growth rates. We suggest that salient characteristics of China — high levels of state control and corruption along with high measures of authoritarian rule — make a discontinuous decline in growth even more likely than general experience would suggest. China’s growth record in the past 35 years has been remarkable, and nothing in our analysis suggests that a sharp slowdown is inevitable. Still, our analysis suggests that forecasters and planners looking at China would do well to contemplate a much wider range of outcomes than are typically considered.

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The Politics of Capital Flight in the Global Economic Crisis

Thomas Pepinsky
Economics & Politics, November 2014, Pages 431–456

Abstract:
This paper studies the effects of economic governance and political institutions on portfolio investment during the Global Economic Crisis of 2008–2009. Leveraging a unique cross-national dataset on portfolio flows immediately following the collapse of Lehman Brothers in September 2008, it shows that countries with “better institutions” – those with more (or less) democratic, more (or less) constrained or more accountable political systems – were no less vulnerable to portfolio outflows than countries with “worse institutions.” However, countries with better governance prior to the crisis – those with better regulatory apparatuses, rule of law, property rights, and those considered less politically risky – experienced lower net portfolio capital outflows after Lehman. Governance is in fact the strongest predictor of portfolio capital flows during the global flight to liquidity, while political institutions perform poorly. The findings shed light onto the political factors that mediated how the collapse of Lehman affected national financial markets the world over, and have implications for literatures on the political economy of foreign investment, as well as for broader topics of institutions, governance, and economic performance.

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Labor Market Effects of Social Programs: Evidence from India's Employment Guarantee

Clément Imbert & John Papp
American Economic Journal: Applied Economics, forthcoming

Abstract:
We estimate the effect of a large rural workfare program in India on private employment and wages by comparing trends in districts that received the program earlier relative to those that received it later. Our results suggest that public sector hiring crowded out private sector work and increased private sector wages. We compute the implied welfare gains of the program by consumption quintile. Our calculations show that the welfare gains to the poor from the equilibrium increase in private sector wages are large in absolute terms and large relative to the gains received solely by program participants.

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Urban working-class food consumption and nutrition in Britain in 1904

Ian Gazeley & Andrew Newell
Economic History Review, forthcoming

Abstract:
This article re-examines the food consumption of working-class households in 1904 and compares the nutritional content of these diets with modern measures of adequacy. We find a fairly steep gradient of nutritional attainment relative to economic class, with high levels of vitamin and mineral deficiency among the very poorest working households. However, we conclude that the average unskilled-headed working household was better fed and nourished than previously thought. When proper allowance is made for the likely consumption of alcohol, household energy intakes were significantly higher still. We investigate the likely impact of contemporary cultural food distribution norms and conclude on the basis of the very limited evidence available that women may have received, on average, about 80 per cent of a man's share of the available food. We adjust energy requirements for likely higher physical activity rates and smaller stature and find that except among the poorest households, early twentieth-century diets were sufficient to provide energy for reasonably physically demanding work. These results are consistent with recent attempts to relate the available anthropometric evidence to long-run trends in food consumption. We also find that the lower tail of the household nutrition distribution drops away very rapidly, so that few households are estimated to have suffered severe food shortages.

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Gross Domestic Product, Science Interest, and Science Achievement: A Person × Nation Interaction

Elliot Tucker-Drob, Amanda Cheung & Daniel Briley
Psychological Science, November 2014, Pages 2047-2057

Abstract:
Maximizing science achievement is a critical target of educational policy and has important implications for national and international economic and technological competitiveness. Previous research has identified both science interest and socioeconomic status (SES) as robust predictors of science achievement, but little research has examined their joint effects. In a data set drawn from approximately 400,000 high school students from 57 countries, we documented large Science Interest × SES and Science Interest × Per Capita Gross Domestic Product (GDP) interactions in the prediction of science achievement. Student interest in science is a substantially stronger predictor of science achievement in higher socioeconomic contexts and in higher-GDP nations. Our results are consistent with the hypothesis that in higher-opportunity contexts, motivational factors play larger roles in learning and achievement. They add to the growing body of evidence indicating that substantial cross-national differences in psychological effect sizes are not simply a logical possibility but, in many cases, an empirical reality.

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A Disruption Mechanism for Bribes

Robert Cooter & Nuno Garoupa
Review of Law & Economics, September 2014, Pages 241–263

Abstract:
Crimes such as bribery require the cooperation of two or more criminals for mutual gain. Instead of deterring these crimes, the state should disrupt them by creating distrust among criminals so they cannot cooperate. In a cooperative crime with two criminals, the state should offer amnesty and a bounty to the criminal who first secures punishment of the other criminal. When the bounty exceeds the bribe, a bribed official gains less from keeping the bribe than from confessing and receiving the bounty. Consequently the person who pays the bribe cannot trust the person who takes it. The game’s unique equilibrium is non-cooperative and bribes disappear. We explore legal implications and practical challenges to this disruption mechanism.

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Seven Million Lives Saved: Under-5 Mortality Since the Launch of the Millennium Development Goals

John McArthur
Brookings Institution Working Paper, September 2014

Abstract:
To what extent have developing countries’ patterns in reducing under-5 mortality rates (U5MR) changed since the advent of the Millennium Development Goals (MDGs)? This paper investigates that question across multiple time horizons, with attention to the fact that countries’ progress had already begun to accelerate during the late 1990s compared to the early 1990s. The paper gives special consideration to countries the MDGs were primarily intended to support, including initially “Off Track” and low-income countries. Although only 21 percent of originally Off Track countries and 34 percent of originally low-income countries are now on a path to achieve the MDG target by 2015, at least 80 percent of each group has seen accelerated progress since 2001. Approximately 90 percent of countries in sub-Saharan Africa have accelerated. Most importantly, regression analysis indicates that cross-country trends since 2000 differ considerably from previous decades. The years since the launch of the MDGs include the first extended period in at least four decades during which rates of U5MR decline have not been negatively correlated with U5MR levels. Compared to a conservative counterfactual trend from 1996 to 2001, at least 7.5 million additional children’s lives are estimated to have been saved between 2002 and 2013. The results suggest that much of the greatest structural progress has been achieved by countries not likely to achieve the formal MDG targets, even if their progress might be linked to the pursuit of those targets. Implications are considered for setting U5MR targets through to 2030.

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Dealing with drainage: State regulation of drainage projects in the Dutch Republic, France, and England during the sixteenth and seventeenth centuries

Piet van Cruyningen
Economic History Review, forthcoming

Abstract:
In the early modern period the viability of large-scale drainage projects implemented by courtiers, officials, or merchants could be endangered by litigation or violent conflicts with landlords, commoners, cities, or water boards whose interests were harmed by the implementation of such projects. A comparison between the Dutch Republic, England, and France shows that the Dutch had developed institutions to deal with this efficiently. State patents for drainage granted compensation to all parties involved and precluded long drawn-out lawsuits. When large-scale drainage began in England and France from c. 1600 onwards, these states had no experience with drainage regulation. They had to find their way by trial and error. In England this led to lawsuits and riots by commoners that ruined several drainage schemes. The decentralized nature of the Dutch state turned out to be an advantage. Dutch politicians and entrepreneurs were used to compromises, and solutions could be adapted to local circumstances. In more centralized England and France this was more difficult to achieve. The Dutch also profited from the fact that territorial lords had already abolished common rights of usage in the coastal provinces in the late middle ages, thus removing an important source of conflict.

By KEVIN LEWIS | 09:00:00 AM

Tuesday, November 11, 2014

Caricature

A Superhumanization Bias in Whites’ Perceptions of Blacks

Adam Waytz, Kelly Marie Hoffman & Sophie Trawalter
Social Psychological and Personality Science, forthcoming

Abstract:
The present research provides the first systematic empirical investigation into superhumanization, the attribution of supernatural, extrasensory, and magical mental and physical qualities to humans. Five studies test and support the hypothesis that White Americans superhumanize Black people relative to White people. Studies 1–2b demonstrate this phenomenon at an implicit level, showing that Whites preferentially associate Blacks versus Whites with superhuman versus human words on an implicit association test and on a categorization task. Studies 3–4 demonstrate this phenomenon at an explicit level, showing that Whites preferentially attribute superhuman capacities to Blacks versus Whites, and Study 4 specifically shows that superhumanization of Blacks predicts denial of pain to Black versus White targets. Together, these studies demonstrate a novel and potentially detrimental process through which Whites perceive Blacks.

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A rose by any other name?: The consequences of subtyping “African-Americans” from “Blacks”

Erika Hall, Katherine Phillips & Sarah Townsend
Journal of Experimental Social Psychology, January 2015, Pages 183–190

Abstract:
Racial labels often define how social groups are perceived. The current research utilized both archival and experimental methods to explore the consequences of the “Black” vs. “African-American” racial labels on Whites' evaluations of racial minorities. We argue that the racial label Black evokes a mental representation of a person with lower socioeconomic status than the racial label African-American, and that Whites will react more negatively toward Blacks (vs. African-Americans). In Study 1, we show that the stereotype content for Blacks (vs. African-Americans) is lower in status, positivity, competence, and warmth. In Study 2, Whites view a target as lower status when he is identified as Black vs. African-American. In Study 3, we demonstrate that the use of the label Black vs. African-American in a US Newspaper crime report article is associated with a negative emotional tone in that respective article. Finally, in Study 4, we show that Whites view a criminal suspect more negatively when he is identified as Black vs. African-American. The results establish how racial labels can have material consequences for a group.

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Gendered Race Prototypes: Evidence for the non-prototypicality of Asian men and Black women

Joanna Schug, Nicholas Alt & Karl Christoph Klauer
Journal of Experimental Social Psychology, January 2015, Pages 121–125

Abstract:
Previous research from the perspective of gendered race theory has demonstrated that stereotypes about race often contain a gendered component, whereby certain racial and ethnic groups are stereotyped as more masculine or feminine. In particular, in North American contexts, Blacks tend to be associated with masculinity, while Asians tend to be associated with femininity. In this paper we present the hypothesis that Asian men and Black women are deemed less prototypical of their overarching racial groups due to the mismatch between their identities and gendered race stereotypes. First, we show evidence demonstrating that Asian men face invisibility at the cognitive level, consistent with previous theory and research related to Black women (Study 1). Second, we present direct evidence that participants are more likely to imagine a man when thinking of a Black individual and less likely to think of a man when imagining an Asian individual, relative to the frequency of Whites (Study 2). Overall, our results support the hypothesis that Asian men and Black women are viewed as less prototypical of their race categories. We discuss implications and future directions for work on intersectionality and gendered race theory.

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Just Skin Deep? The Impact of Interviewer Race on the Assessment of African American Respondent Skin Tone

Lance Hannon & Robert DeFina
Race and Social Problems, December 2014, Pages 356-364

Abstract:
Over the last decade, the Equal Employment Opportunity Commission has seen a significant increase in the number of discrimination claims based on skin shade. However, in some ways, substantiating colorism has proven to be more difficult than documenting racism, as skin tone data are rarely collected and few existing skin tone measures have been validated. The present study examines an increasingly popular skin tone scale that includes a professionally designed color guide to enhance rater consistency. Logistic regression analysis of data from the National Longitudinal Survey of Youth and General Social Survey indicates that despite the addition of the color guide, the race of the interviewer matters for the assessment of respondent skin tone. On average, African American respondents with a white interviewer were about 3 times more likely to be classified as dark than those with an African American interviewer. We argue that failing to appropriately account for this race-of-interviewer effect can significantly impact colorism findings.

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Secrets and Misperceptions: The Creation of Self-Fulfilling Illusions

Sarah Cowan
Sociological Science, November 2014, Pages 466-492

Abstract:
This study examines who hears what secrets, comparing two similar secrets-one which is highly stigmatized and one which is less so. Using a unique survey representative of American adults and intake forms from a medical clinic, I document marked differences in who hears these secrets. People who are sympathetic to the stigmatizing secret are more likely to hear of it than those who may react negatively. This is a consequence not just of people selectively disclosing their own secrets but selectively sharing others’ as well. As a result, people in the same social network will be exposed to and influenced by different information about those they know and hence experience that network differently. When people effectively exist in networks tailored by others to not offend then the information they hear tends to be that of which they already approve. Were they to hear secrets they disapprove of then their attitudes might change but they are less likely to hear those secrets. As such, the patterns of secret-hearing contribute to a stasis in public opinion.

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The White Ceiling Heuristic and the Underestimation of Asian-American Income

Chris Martin & John Nezlek
PLoS ONE, September 2014

Abstract:
The belief that ethnic majorities dominate ethnic minorities informs research on intergroup processes. This belief can lead to the social heuristic that the ethnic majority sets an upper limit that minority groups cannot surpass, but this possibility has not received much attention. In three studies of perceived income, we examined how this heuristic, which we term the White ceiling heuristic leads people to inaccurately estimate the income of a minority group that surpasses the majority. We found that Asian Americans, whose median income has surpassed White median income for nearly three decades, are still perceived as making less than Whites, with the least accurate estimations being made by people who strongly believe that Whites are privileged. In contrast, income estimates for other minorities were fairly accurate. Thus, perceptions of minorities are shaped both by stereotype content and a heuristic.

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Do You Really Understand? Achieving Accuracy in Interracial Relationships

Deborah Son Holoien et al.
Journal of Personality and Social Psychology, forthcoming

Abstract:
Accurately perceiving whether interaction partners feel understood is important for developing intimate relationships and maintaining smooth interpersonal exchanges. During interracial interactions, when are Whites and racial minorities likely to accurately perceive how understood cross-race partners feel? We propose that participant race, desire to affiliate, and racial salience moderate accuracy in interracial interactions. Examination of cross-race roommates (Study 1) and interracial interactions with strangers (Study 2) revealed that when race is salient, Whites higher in desire to affiliate with racial minorities failed to accurately perceive the extent to which racial minority partners felt understood. Thus, although the desire to affiliate may appear beneficial, it may interfere with Whites’ ability to accurately perceive how understood racial minorities feel. By contrast, racial minorities higher in desire to affiliate with Whites accurately perceived how understood White partners felt. Furthermore, participants’ overestimation of how well they understood partners correlated negatively with partners’ reports of relationship quality. Collectively, these findings indicate that racial salience and desire to affiliate moderate accurate perceptions of cross-race partners — even in the context of sustained interracial relationships — yielding divergent outcomes for Whites and racial minorities.

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Beauty is in the in-group of the beholded: Intergroup differences in the perceived attractiveness of leaders

Kevin Kniffin et al.
Leadership Quarterly, forthcoming

Abstract:
Physical attractiveness is most commonly presumed to be an exogenous characteristic that influences people's feelings, perceptions, and behavior across myriad types of relationships. We investigate the opposite prediction in which feelings toward other people influence the perceptions of others' attractiveness. Focusing specifically on subordinates' perceptions of leaders of in-groups and out-groups, we examine whether group membership moderates familiarity in relation to ratings of physical attractiveness. Studies 1 and 2 show that subordinates rate the leaders of their in-groups as significantly more physically attractive than comparably familiar out-group leaders. Our findings have relevance for understanding the interactive roles of physical attractiveness within contemporary organizational environments and help to account for variance in interpersonal perceptions on the basis of group membership. In contrast with research traditions that treat physical attractiveness as a static trait, our findings highlight the importance of group membership as a lens for perceiving familiar leaders' physical attractiveness.

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Sexualized Avatars Lead to Women’s Self-Objectification and Acceptance of Rape Myths

Jesse Fox et al.
Psychology of Women Quarterly, forthcoming

Abstract:
Research has indicated that many video games and virtual worlds are populated by unrealistic, hypersexualized representations of women, but the effects of using these representations remain understudied. Objectification theory suggests that women’s exposure to sexualized media representations leads to self-objectification. Further, we anticipated this process would lead to increases in rape myth acceptance (RMA). Two experiments (Study 1, N = 87; Study 2, N = 81) examined the effects of avatar features on women’s experiences of self-objectification. In both studies, college women exposed to sexualized avatars experienced higher levels of self-objectification after the virtual experience than those exposed to nonsexualized avatars. Furthermore, in Study 2, self-objectification mediated the relationship between controlling a sexualized avatar and subsequent levels of RMA. We discuss the implications of women using sexualized avatars in video games and virtual environments, which may lead to negative attitudes about the self and other women off-line due to heightened self-objectification.

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Sexual objectification pushes women away: The role of decreased likability

Fei Teng et al.
European Journal of Social Psychology, forthcoming

Abstract:
The present investigation examined the effect of sexual objectification on women's intention to affiliate with men. We predicted that women would perceive an objectifier as less likable following sexual objectification and thus would distance themselves from the perpetrator. Study 1 found that objectification led female participants to perceive their male partner as less likable and to be less willing to affiliate with the partner. Study 2 replicated Study 1 in a concurrent interpersonal interaction and extended these effects to a man having a similar background with the perpetrator. Study 3 showed that power moderated the effect of sexual objectification on women's interaction intention such that only women with equal or low power (as compared to the objectifier) decreased their affiliation intention toward the objectifier, whereas high-power women did not show this effect. Implications of these findings were discussed.

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“I Thought You Were Japanese”: Ethnic Miscategorization and Identity Assertion

Matthew Trujillo, Randi Garcia & Nicole Shelton
Cultural Diversity and Ethnic Minority Psychology, forthcoming

Abstract:
Across 2 studies we examined how ethnic minorities respond to ethnic miscategorization. Using a 21-day experience sampling procedure (Study 1), we found that ethnic minorities exhibited greater ethnic identity assertion when they had reported being ethnically miscategorized the previous day. Similarly, we found that ethnic minorities who were ethnically miscategorized (vs. not) by a White partner in the laboratory exhibited greater ethnic identity assertion and expressed greater dislike of their partner (Study 2). In both studies, these effects were stronger for individuals whose ethnic identity was central to their self-concept. The implications of these findings for ethnic identity development and intergroup relations are discussed.

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Anxiety perseverance in intergroup interaction: When incidental explanations backfire

Tessa West, Adam Pearson & Chadly Stern
Journal of Personality and Social Psychology, November 2014, Pages 825-843

Abstract:
Intergroup interactions are often anxiety provoking, and this can lead members of both majority and minority groups to avoid contact. Whereas negative consequences of experiencing intergroup anxiety are well documented, the role of perceived anxiety has received substantially less theoretical and empirical attention. We demonstrate in 3 experiments that the perception of anxiety in others can undermine intergroup interactions even when the anxiety can be attributed to a source that is unrelated to the interaction. Participants who learned that a cross-race partner’s anxiety could be attributed to an upcoming evaluation (Study 1) or a stimulant (i.e., caffeine, Studies 2 and 3) expressed less interest in continuing an interaction (Studies 1 and 2), showed less self-disclosure (Study 2), and increased physical distance between themselves and their partner (Study 3) than did those given no source information and participants who interacted with a same-race partner. Moreover, compared to control participants, perceivers who were given an incidental explanation for their partner’s anxiety perceived outgroup, but not ingroup, partners as more anxious (Studies 1 and 3) and showed heightened accessibility of anxiety words (Study 3), indicating that incidental source information enhanced accessibility of intergroup (but not intragroup) anxiety at early stages of information processing. Theoretical and practical implications for combating paradoxical effects of perceived anxiety in intergroup interactions are considered.

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Positive Expectations Encourage Generalization From a Positive Intergroup Interaction to Outgroup Attitudes

Matthew Deegan et al.
Personality and Social Psychology Bulletin, forthcoming

Abstract:
The current research reveals that while positive expectations about an anticipated intergroup interaction encourage generalization of positive contact to outgroup attitudes, negative expectations restrict the effects of contact on outgroup attitudes. In Study 1, when Blacks and Whites interacted with positive expectations, interaction quality predicted outgroup attitudes to a greater degree than when groups interacted with negative expectations. When expectations (Studies 2 and 3) and the actual interaction quality (Study 4) were manipulated orthogonally, negative expectations about the interaction predicted negative outgroup attitudes, regardless of actual interaction quality. By contrast, participants holding positive expectations who experienced a positive interaction expressed positive outgroup attitudes, whereas when they experienced a negative interaction, they expressed outgroup attitudes as negative as those with negative expectations. Across all four studies, positive expectations encouraged developing outgroup attitudes consistent with interaction quality.

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Do natural kind beliefs about social groups contribute to prejudice? Distinguishing bio-somatic essentialism from bio-behavioral essentialism, and both of these from entitativity

Michael Andreychik & Michael Gill
Group Processes & Intergroup Relations, forthcoming

Abstract:
Do essentialist conceptions of racial groups foster prejudice and negative attitudes? Existing literature provides mixed results. We propose that relations between essentialism and negative attitudes will become clearer in light of a new conceptualization of essentialism derived from literature on how laypersons reason about biological inheritance. Accordingly, we propose a distinction between two types of essentialism: Bio-somatic essentialism and bio-behavioral essentialism. Further, we distinguish both of these types of essentialism from entitativity, and argue that essentialism and entitativity exert independent effects on prejudice and negative attitudes. Study 1 shows that bio-behavioral essentialism — but not bio-somatic essentialism — contributes to prejudice, and that bio-behavioral essentialism and perceived entitativity exert independent effects on prejudice. In Study 2, we manipulate whether participants hold a bio-somatic essentialist, bio-behavioral essentialist, or antiessentialist theory about a novel group and show that bio-behavioral essentialism is uniquely facilitative of negative attitudes toward a negatively behaving outgroup. Finally, in Study 3 we manipulate both essentialist theories and entitativity and show that bio-behavioral essentialism and strong perceptions of entitativity independently increase negative attitudes. Because both bio-somatic essentialism and bio-behavioral essentialism involve seeing a group as a “natural kind,” our work suggests that only particular types of natural kind beliefs are related to negative attitudes.

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Individuation training with other-race faces reduces preschoolers’ implicit racial bias: A link between perceptual and social representation of faces in children

Wen Xiao et al.
Developmental Science, forthcoming

Abstract:
The present study examined whether perceptual individuation training with other-race faces could reduce preschool children's implicit racial bias. We used an ‘angry = outgroup’ paradigm to measure Chinese children's implicit racial bias against African individuals before and after training. In Experiment 1, children between 4 and 6 years were presented with angry or happy racially ambiguous faces that were morphed between Chinese and African faces. Initially, Chinese children demonstrated implicit racial bias: they categorized happy racially ambiguous faces as own-race (Chinese) and angry racially ambiguous faces as other-race (African). Then, the children participated in a training session where they learned to individuate African faces. Children's implicit racial bias was significantly reduced after training relative to that before training. Experiment 2 used the same procedure as Experiment 1, except that Chinese children were trained with own-race Chinese faces. These children did not display a significant reduction in implicit racial bias. Our results demonstrate that early implicit racial bias can be reduced by presenting children with other-race face individuation training, and support a linkage between perceptual and social representations of face information in children.

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The Effects of Avatar Stereotypes and Cognitive Load on Virtual Interpersonal Attraction: Mediation Effects of Perceived Trust and Reversed Perceptions Under Cognitive Load

Jorge Peña & Seung-Chul Yoo
Communication Research, forthcoming

Abstract:
This study examined the effects of avatar visual stereotypes and cognitive load on interpersonal attraction in virtual interactions. Avatars dressed in black were perceived as less attractive relative to identical avatars in white. The assumption that cognitively busy perceivers develop more stereotypical perceptions was rejected. Instead, cognitively non-busy participants developed more stereotypical impressions. Remarkably, cognitive load reversed avatar perceptions. Cognitively busy participants rated avatars in black as more attractive but avatars in white as less attractive. Perceived trust mediated the link between avatar appearance and task attraction. In addition, cognitive load moderated the strength of the indirect relationship between avatar appearance and task attraction through trust. The findings have important implications for virtual perceptions and misperceptions.

By KEVIN LEWIS | 09:00:00 AM

Monday, November 10, 2014

Walking down Wall Street

The People in Your Neighborhood: Social Interactions and Mutual Fund Portfolios

Veronika Pool, Noah Stoffman & Scott Yonker
Journal of Finance, forthcoming

Abstract:
We find that socially connected fund managers have more similar holdings and trades. The overlap of funds whose managers reside in the same neighborhood is considerably higher than that of funds whose managers live in the same city but in different neighborhoods. These effects are larger when managers share a similar ethnic background, and are not explained by preferences. Valuable information is transmitted through these peer networks: a long-short strategy composed of stocks purchased minus sold by neighboring managers delivers positive risk-adjusted returns. Unlike prior empirical work, our tests disentangle the effects of social interactions from community effects.

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Weather-Induced Mood, Institutional Investors, and Stock Returns

William Goetzmann et al.
Review of Financial Studies, forthcoming

Abstract:
This study shows that weather-based indicators of mood impact perceptions of mispricing and trading decisions of institutional investors. Using survey and disaggregated trade data, we show that relatively cloudier days increase perceived overpricing in individual stocks and the Dow Jones Industrial Index and increase selling propensities of institutions. We introduce stock-level measures of investor mood; investor optimism positively impacts stock returns among stocks with higher arbitrage costs, and stocks experiencing similar investor mood exhibit return comovement. These findings complement existing studies on how weather impacts stock index returns and identify another channel through which it can manifest.

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Trading as Gambling

Anne Jones Dorn, Daniel Dorn & Paul Sengmueller
Management Science, forthcoming

Abstract:
This paper offers evidence from three different samples consistent with investors substituting between playing the lottery and gambling in financial markets. In the United States, increases in the jackpots of the multistate lotteries Powerball and Mega Millions are associated with significant reductions in small trade participation in the stock market. California-based discount brokerage clients and German discount brokerage clients are significantly less likely to trade during weeks with larger lottery prizes in the California and German lotteries, respectively. Variation in lottery prizes affects speculative trading in more lottery-like securities such as individual stocks and options, but not trading in bonds and mutual funds. Trading that is likely associated with long-term savings motives, such as trading in retirement accounts, does not respond to lottery jackpots, either. The negative relation between trading activity and jackpots is stronger for individuals who are more likely to play the lottery.

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Impact of the Dodd-Frank Act on Credit Ratings

Valentin Dimitrov, Darius Palia & Leo Tang
Journal of Financial Economics, forthcoming

Abstract:
We analyze the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) on corporate bond ratings issued by credit rating agencies (CRAs). We find no evidence that Dodd-Frank disciplines CRAs to provide more accurate and informative credit ratings. Instead, following Dodd-Frank, CRAs issue lower ratings, give more false warnings, and issue downgrades that are less informative. These results are consistent with the reputation model of Morris (2001), and suggest that CRAs become more protective of their reputation following the passage of Dodd-Frank. Consistent with Morris (2001), we find that our results are stronger for industries with low Fitch market share, where Moody's and Standard & Poor's have stronger incentives to protect their reputation (Becker and Milbourn, 2011). Our results are not driven by business cycle effects or firm characteristics, and strengthen as the uncertainty regarding the passage of Dodd-Frank gets resolved. We conclude that increasing the legal and regulatory costs to CRAs might have an adverse effect on the quality of credit ratings.

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The potential effect of US baby-boom retirees on stock returns

Haim Kedar-Levy
North American Journal of Economics and Finance, November 2014, Pages 106–121

Abstract:
Empirical studies demonstrated that US baby boomers consumption and savings patterns have affected economic aggregates over the past decades, among them equity returns. Boomers’ retirement is expected to mitigate the demand for equities until 2050, but its impact varies with the specific population age structure along decades. This paper employs a dynamic asset pricing model with optimum consumption and portfolio rules to estimate aging effects on S&P500 returns between 1950 and 2050. Calibration for demographic and economic data between 1950 and 2005 yields model estimates that significantly explain the moving average of S&P500 returns. Further, taking into account the present value of expected demographic effects until 2050 suggests that the S&P500 was fairly priced at the heart of the financial crisis, on April 2009, but overpriced thereafter.

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Presidential Elections and the Market Pricing of Future Earnings

Michael Drake, Michael Mayberry & Jaron Wilde
BYU Working Paper, October 2014

Abstract:
We examine whether presidential elections influence the market pricing of future earnings. We predict that uncertainty surrounding presidential election outcomes, and the associated policy changes that impact future firm operations, reduces the extent to which current prices reflect information about future earnings. We estimate future earnings response coefficients (FERCs) for the years 1981-2009, a period that covers seven presidential elections, and find that FERCs are significantly lower (by approximately 7.2 percent) during presidential election years compared to other years. Additional analyses using pseudo election years, ex-ante polls and ex-post margins of victory, and cross-sectional firm characteristics confirm that the lower FERCs during election years are related to political election uncertainty. We also investigate potential explanations for the lower FERCs during election years and find that it is related to increased forecasting uncertainty, and not to changes in discount rates or noise trading. Overall, we contribute to the literature by providing the first empirical evidence on whether and how political election uncertainty influences the pricing of future earnings.

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The Worst, the Best, Ignoring All the Rest: The Rank Effect and Trading Behavior

Samuel Hartzmark
Review of Financial Studies, forthcoming

Abstract:
I document a new stylized fact about how investors trade assets: individuals are more likely to sell the extreme winning and extreme losing positions in their portfolio (“the rank effect”). This effect is not driven by firm-specific information, holding period or the level of returns itself, but is associated with the salience of extreme portfolio positions. The rank effect is exhibited by both retail traders and mutual fund managers. The effect indicates that trades in a given stock depend on how the stock compares to other positions in an investor's portfolio.

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The Costs and Benefits of Mandatory Securities Regulation: Evidence from Market Reactions to the JOBS Act of 2012

Dhammika Dharmapala & Vikramaditya Khanna
University of Chicago Working Paper, August 2014

Abstract:
The effect of mandatory securities regulation on firm value has been a longstanding concern across law, economics and finance. In 2012, Congress enacted the Jumpstart Our Business Startups (“JOBS”) Act, relaxing disclosure and compliance obligations for a new category of firms known as “emerging growth companies” (EGCs) that satisfied certain criteria (such as having less than $1 billion of annual revenue). The JOBS Act’s definition of an EGC involved a limited degree of retroactivity, extending its application to firms that conducted initial public offerings (IPOs) between December 8, 2011 and April 5, 2012 (the day the bill became law). The December 8 cutoff date was publicly known prior to the JOBS bill’s key legislative events, notably those of March 15, 2012, when Senate consideration began and the Senate Majority Leader expressed strong support for the bill. We analyze market reactions for EGCs that conducted IPOs after the cutoff date, relative to a control group of otherwise similar firms that conducted IPOs in the months preceding the cutoff date. We find positive and statistically significant abnormal returns for EGCs around March 15, relative to the control firms. This suggests that the value to investors of the disclosure and compliance obligations relaxed under the JOBS Act is outweighed by the associated compliance costs. The baseline results imply a positive abnormal return of between 3% and 4%, and the implied increase in firm value is at least $20 million for an EGC with the median market value in our sample.

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Predatory Short Selling

Markus Brunnermeier & Martin Oehmke
Review of Finance, October 2014, Pages 2153-2195

Abstract:
Financial institutions may be vulnerable to predatory short selling. When the stock of a financial institution is shorted aggressively, leverage constraints imposed by short-term creditors can force the institution to liquidate long-term investments at fire sale prices. For financial institutions that are sufficiently close to their leverage constraints, predatory short-selling equilibria coexist with no-liquidation equilibria (the vulnerability region) or may even be the unique equilibrium outcome (the doomed region). Increased coordination among short sellers expands the doomed region, where liquidation is the unique equilibrium. Our model provides a potential justification for temporary restrictions on short selling of vulnerable institutions and can be used to assess recent empirical evidence on short-sale bans.

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Culture and R2

Cheol Eun, Lingling Wang & Steven Xiao
Journal of Financial Economics, forthcoming

Abstract:
Consistent with predictions from the psychology literature, we find that stock prices co-move more (less) in culturally tight (loose) and collectivistic (individualistic) countries. Culture influences stock price synchronicity by affecting correlations in investors' trading activities and a country's information environment. Both market-wide and firm-specific variations are lower in tighter cultures. Individualism is mostly associated with higher firm-specific variations. Trade and financial openness weakens the effect of domestic culture on stock price comovements. These results hold for various robustness checks. Our study suggests that culture is an important omitted variable in the literature that investigates cross-country differences in stock price comovements.

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Does Media Coverage of Stocks Affect Mutual Funds' Trading and Performance?

Lily Fang, Joel Peress & Lu Zheng
Review of Financial Studies, forthcoming

Abstract:
We study the relation between mutual fund trades and mass media coverage of stocks. We find that funds exhibit persistent differences in their propensity to buy media-covered stocks. Moreover, this propensity is negatively related to their future performance. Funds in the highest propensity decile underperform funds in the lowest propensity decile by 1.1% to 2.8% per year. These results do not extend to fund sells, likely because of funds' inability to sell short. Overall, the findings suggest that professional investors are subject to limited attention.

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Counterparty Risk and the Establishment of the New York Stock Exchange Clearinghouse

Asaf Bernstein, Eric Hughson & Marc Weidenmier
NBER Working Paper, September 2014

Abstract:
Heightened counterparty risk during the recent financial crisis has raised questions about the role clearinghouses play in global financial stability. Empirical identification of the effect of centralized clearing on counterparty risk is challenging because of the co-incidence of macro-economic turbulence and the introduction of clearinghouses. We overcome these concerns by examining a novel historical experiment, the establishment of a clearinghouse on the New York Stock Exchange (NYSE) in 1892. During this period the largest NYSE stocks were also listed on the Consolidated Stock Exchange (CSE), which already had a clearinghouse. Using identical securities on the CSE as a control, we find that the introduction of clearing reduced annualized volatility of NYSE returns by 90-173bps and increased asset values. Prior to clearing, shocks to overnight lending rates reduced the value of stocks on the NYSE, relative to identical stocks on the CSE, but this was no longer true after the establishment of clearing. We also show that at least ½ of the average reduction in counterparty risk on the NYSE is driven by a reduction in contagion risk – the risk of a cascade of broker defaults. Our results indicate that clearing can cause a significant improvement in market stability and value through a reduction in network contagion and counterparty risk.

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Are Stars’ Opinions Worth More? The Relation Between Analyst Reputation and Recommendation Values

Lily Fang & Ayako Yasuda
Journal of Financial Services Research, December 2014, Pages 235-269

Abstract:
Using 1994–2009 data, we find that All-American (AA) analysts’ buy and sell portfolio alphas significantly exceed those of non-AAs by up to 0.6 % per month after risk-adjustments for investors with advance access to analyst recommendations. For investors without such access, top-rank AAs still earn significantly higher (by 0.3 %) monthly alphas in buy recommendations than others. AAs’ superior performance exists before (as well as after) they are elected, is not explained by market overreactions to stars, and is not significantly eroded after Reg-FD. Election to top-AA ranks predicts future performance in buy recommendations above and beyond other previously observable analyst characteristics. Institutional investors actively evaluate analysts and update the AA roster accordingly. Collectively, these results suggest that skill differences among analysts exist and AA election reflects institutional investors’ ability to evaluate and benefit from elected analysts’ superior skills. Other investors’ opportunity to profit from the stars’ opinions exists, but is limited due to their timing disadvantage.

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Can Analysts Predict Rallies Better Than Crashes?

Ivan Medovikov
Finance Research Letters, forthcoming

Abstract:
We use the copula approach to study the structure of dependence between sell-side analysts’ consensus recommendations and subsequent security returns, with a focus on asymmetric tail dependence. We match monthly vintages of I/B/E/S recommendations for the period January to December 2011 with excess security returns during six months following recommendation issue. Using a mixed Gaussian-symmetrized Joe-Clayton copula model we find evidence to suggest that analysts can identify stocks that will substantially outperform, but not underperform relative to the market, and that their predictive ability is conditional on recommendation changes.

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Media Makes Momentum

Alexander Hillert, Heiko Jacobs & Sebastian Müller
Review of Financial Studies, forthcoming

Abstract:
Relying on 2.2 million articles from forty-five national and local U.S. newspapers between 1989 and 2010, we find that firms particularly covered by the media exhibit, ceteris paribus, significantly stronger momentum. The effect depends on article tone, reverses in the long run, is more pronounced for stocks with high uncertainty, and is stronger in states with high investor individualism. Our findings suggest that media coverage can exacerbate investor biases, leading return predictability to be strongest for firms in the spotlight of public attention. These results collectively lend credibility to an overreaction-based explanation for the momentum effect.

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Crowdfunding, cascades and informed investors

Simon Parker
Economics Letters, forthcoming

Abstract:
Do higher proportions of (a) informed investors and (b) high-quality projects increase the number of good projects that are ultimately financed via crowdfunding? A simple model and simulation reveals the answers to both questions to be: ‘not necessarily’.

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Uncommon Value: The Characteristics and Investment Performance of Contrarian Funds

Kelsey Wei, Russ Wermers & Tong Yao
Management Science, forthcoming

Abstract:
Motivated by extant theories of herding behavior, this paper empirically identifies contrarian mutual funds as those trading most frequently against the crowd. We find that contrarian funds generate superior performance both when they trade against and with the herd, indicating that they possess superior private information. Furthermore, contrarians do not trade in a particularly correlated fashion with each other, consistent with these funds having disparate information. Our fund-level contrarian measure is largely unrelated to existing measures of fund strategy uniqueness, as both contrarian and herding funds score highly on such measures. Building on our finding of superior alphas for contrarian funds, we construct a stock-level contrarian score that reflects the aggregate stock selection information possessed by contrarian managers. This stock-level contrarian score significantly predicts stock returns after controlling for measures of stock-level herding, as well as a battery of return-predictive investment signals documented in prior studies.

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Do individual currency traders make money?

Boris Abbey & John Doukas
Journal of International Money and Finance, forthcoming

Abstract:
Using a unique online currency transactions dataset, we examine the performance, trading activity, drawdown, and timing abilities of individual currency traders. Evidence from 428 accounts during the 2004-2009 period shows that currency traders earn positive abnormal returns, even after accounting for transaction costs. Additionally, the results reveal that day traders not only trade more frequently than non-day traders, but also outperform them in terms of raw, a passive benchmark and risk-adjusted returns. Finally, sorts on trade activity, measured as the mean number of trades per day per account, and account turnover, show a positive association between performance and trade activity.

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Fooling Some of the People All of the Time: The Inefficient Performance and Persistence of Commodity Trading Advisors

Geetesh Bhardwaj, Gary Gorton & Geert Rouwenhorst
Review of Financial Studies, November 2014, Pages 3099-3132

Abstract:
Investors face significant barriers in evaluating the performance of investment advisors. We focus on commodity trading advisors (CTAs) and show that from 1994 to 2012, CTA excess returns to investors (i.e., net of fees) were insignificantly different from zero while gross excess returns (i.e., before fees) were 6.1%, which implies that managers captured the performance in fees. Moreover, we find that CTAs display no alpha relative to simple future strategies in the public domain. Our results have implications for all hedge fund studies in that we find the typical adjustments for biases in the hedge fund databases still leave upward bias in fund performance.

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Information Networks: Evidence from Illegal Insider Trading Tips

Kenneth Ahern
University of Southern California Working Paper, October 2014

Abstract:
This paper exploits a novel hand collected dataset to provide a comprehensive analysis of the demographics and social relationships behind illegal insider trading networks. I find that the majority of inside traders are connected through family and friendship links and a minority are connected through professional relationships. Traders cluster by age, occupation, gender, and location. Traders earn prodigious returns of about 35% over 21 days, where traders farther from the original source earn lower percentage returns, but higher dollar gains. More broadly, this paper provides some of the first evidence on information networks using direct observations of person-to-person communication.

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Rational Information Leakage

Raffi Indjejikian, Hai Lu & Liyan Yang
Management Science, November 2014, Pages 2762-2775

Abstract:
Empirical evidence suggests that information leakage in capital markets is common. We present a trading model to study the incentives of an informed trader (e.g., a well-informed insider) to voluntarily leak information about an asset’s value to one or more independent traders. Our model shows that, although leaking information dissipates the insider’s information advantage about the asset’s value, it enhances his information advantage about the asset’s execution price relative to other informed traders. The profit impact of these two effects are countervailing. When there are a sufficient number of other informed traders, the profit impact from enhanced information dominates. Hence, the insider has incentives to leak some of his private information. We label this rational information leakage and discuss its implications for the regulation of insider trading.

By KEVIN LEWIS | 09:00:00 AM

Sunday, November 9, 2014

Brainy

The Adult Brain Makes New Neurons, and Effortful Learning Keeps Them Alive

Tracey Shors
Current Directions in Psychological Science, October 2014, Pages 311-318

Abstract:
The brain continues to produce new neurons throughout life. For instance, the hippocampus (a brain region necessary for select learning processes) produces thousands of new neurons each day. However, a significant number of them die and do so within just a few weeks of their birth. Laboratory animals that are trained to learn a new skill between one and two weeks after the new cells are generated retain most cells that would have otherwise died. The types of skills that keep new cells alive are not limited to those that depend on the hippocampus but rather include those that are effortful to learn, requiring more training trials or time spent training. Importantly, training alone is not sufficient to increase cell survival; animals that are trained but do not learn do not retain more cells than animals that are not trained. Therefore, learning increases the survival of newly generated cells in the hippocampus as long as the learning experience is new, effortful, and successful. Once rescued, the vast majority of these cells differentiate into neurons, thereby forming synapses and generating action potentials as they become incorporated into the existing architecture and functional circuitry of the adult brain.

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Spatial cognition, mobility, and reproductive success in northwestern Namibia

Layne Vashro & Elizabeth Cashdan
Evolution and Human Behavior, forthcoming

Abstract:
Males occupy a larger range than females in many mammal populations including humans, and show an advantage in certain spatial-cognitive laboratory tasks. Evolutionary psychologists have explained these patterns by arguing that an increase in spatial ability facilitated navigation, which allowed range expansion in pursuit of additional mating and hunting opportunities. This study evaluates this hypothesis in a population with navigational demands similar to those that faced many of our ancestors, the Twe and Tjimba of northwestern Namibia. Twe and Tjimba men have larger visiting ranges than women and are more accurate in both spatial (mental rotations) and navigational (accuracy pointing to distant locations) tasks. Men who perform better on the spatial task not only travel farther than other men, but also have children with more women. These findings offer strong support for the relationship between sex differences in spatial ability and ranging behavior, and identify male mating competition as a possible selective pressure shaping this pattern.

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Morningness–eveningness and intelligence among high-achieving US students: Night owls have higher GMAT scores than early morning types in a top-ranked MBA program

Davide Piffer et al.
Intelligence, November–December 2014, Pages 107–112

Abstract:
Individuals with a propensity to wake up early in the morning (“early-morning” types) and those who like to stay up late at night (“night owls”) often exhibit distinctive psychological and physiological profiles. Previous research has shown that night owls score higher than early-morning people on different measures of cognitive ability and academic achievement. Baseline cortisol is one of the physiological variables associated with variation in chronotype and cognitive function. In this study we investigated whether a relationship between chronotype and performance is present also in the high range of intellectual ability and academic achievement, namely, among graduate students in a top-ranked MBA program in the US. In addition, we measured baseline cortisol levels in saliva samples collected in the early afternoon and analyzed them in relation to chronotype and GMAT scores. As predicted, GMAT scores were significantly higher among night owls than among early-morning types, regardless of sex. GMAT scores were also significantly higher among men than women, regardless of chronotype. Morningness/eveningness was not significantly associated with variation in sleep amount or in undergraduate or graduate GPA scores, suggesting that the association between eveningness and high GMAT scores was not due to differences in study effort or skills. Sex, chronotype and baseline cortisol jointly accounted for 14% of the total variance in GMAT scores; baseline cortisol, however, did not mediate the effect of chronotype on GMAT scores. Consistent with the results of previous research, our study shows that the effects of chronotype on cognitive ability and academic performance are relatively small but detectable even among high-achieving individuals. The mechanism linking eveningness and high cognitive function remains unclear but the role of personality traits and neuroendocrine function warrants further investigation.

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Short-Term Second Language and Music Training Induces Lasting Functional Brain Changes in Early Childhood

Sylvain Moreno et al.
Child Development, forthcoming

Abstract:
Immediate and lasting effects of music or second-language training were examined in early childhood using event-related potentials. Event-related potentials were recorded for French vowels and musical notes in a passive oddball paradigm in thirty-six 4- to 6-year-old children who received either French or music training. Following training, both groups showed enhanced late discriminative negativity (LDN) in their trained condition (music group–musical notes; French group–French vowels) and reduced LDN in the untrained condition. These changes reflect improved processing of relevant (trained) sounds, and an increased capacity to suppress irrelevant (untrained) sounds. After 1 year, training-induced brain changes persisted and new hemispheric changes appeared. Such results provide evidence for the lasting benefit of early intervention in young children.

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Musical Training, Bilingualism, and Executive Function: A Closer Look at Task Switching and Dual-Task Performance

Linda Moradzadeh, Galit Blumenthal & Melody Wiseheart
Cognitive Science, forthcoming

Abstract:
This study investigated whether musical training and bilingualism are associated with enhancements in specific components of executive function, namely, task switching and dual-task performance. Participants (n = 153) belonging to one of four groups (monolingual musician, bilingual musician, bilingual non-musician, or monolingual non-musician) were matched on age and socioeconomic status and administered task switching and dual-task paradigms. Results demonstrated reduced global and local switch costs in musicians compared with non-musicians, suggesting that musical training can contribute to increased efficiency in the ability to shift flexibly between mental sets. On dual-task performance, musicians also outperformed non-musicians. There was neither a cognitive advantage for bilinguals relative to monolinguals, nor an interaction between music and language to suggest additive effects of both types of experience. These findings demonstrate that long-term musical training is associated with improvements in task switching and dual-task performance.

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Effects of the FITKids Randomized Controlled Trial on Executive Control and Brain Function

Charles Hillman et al.
Pediatrics, October 2014, Pages e1063-e1071

Objective: To assess the effect of a physical activity (PA) intervention on brain and behavioral indices of executive control in preadolescent children.

Methods: Two hundred twenty-one children (7–9 years) were randomly assigned to a 9-month afterschool PA program or a wait-list control. In addition to changes in fitness (maximal oxygen consumption), electrical activity in the brain (P3-ERP) and behavioral measures (accuracy, reaction time) of executive control were collected by using tasks that modulated attentional inhibition and cognitive flexibility.

Results: Fitness improved more among intervention participants from pretest to posttest compared with the wait-list control (1.3 mL/kg per minute, 95% confidence interval [CI]: 0.3 to 2.4; d = 0.34 for group difference in pre-to-post change score). Intervention participants exhibited greater improvements from pretest to posttest in inhibition (3.2%, 95% CI: 0.0 to 6.5; d = 0.27) and cognitive flexibility (4.8%, 95% CI: 1.1 to 8.4; d = 0.35 for group difference in pre-to-post change score) compared with control. Only the intervention group increased attentional resources from pretest to posttest during tasks requiring increased inhibition (1.4 µV, 95% CI: 0.3 to 2.6; d = 0.34) and cognitive flexibility (1.5 µV, 95% CI: 0.6 to 2.5; d = 0.43). Finally, improvements in brain function on the inhibition task (r = 0.22) and performance on the flexibility task correlated with intervention attendance (r = 0.24).

Conclusions: The intervention enhanced cognitive performance and brain function during tasks requiring greater executive control. These findings demonstrate a causal effect of a PA program on executive control, and provide support for PA for improving childhood cognition and brain health.

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Enhancing dentate gyrus function with dietary flavanols improves cognition in older adults

Adam Brickman et al.
Nature Neuroscience, forthcoming

Abstract:
The dentate gyrus (DG) is a region in the hippocampal formation whose function declines in association with human aging and is therefore considered to be a possible source of age-related memory decline. Causal evidence is needed, however, to show that DG-associated memory decline in otherwise healthy elders can be improved by interventions that enhance DG function. We addressed this issue by first using a high-resolution variant of functional magnetic resonance imaging (fMRI) to map the precise site of age-related DG dysfunction and to develop a cognitive task whose function localized to this anatomical site. Then, in a controlled randomized trial, we applied these tools to study healthy 50–69-year-old subjects who consumed either a high or low cocoa–containing diet for 3 months. A high-flavanol intervention was found to enhance DG function, as measured by fMRI and by cognitive testing. Our findings establish that DG dysfunction is a driver of age-related cognitive decline and suggest non-pharmacological means for its amelioration.

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An equal start: Absence of group differences in cognitive, social, and neural measures prior to music or sports training in children

Assal Habibi et al.
Frontiers in Human Neuroscience, September 2014

Abstract:
Several studies comparing adult musicians and non-musicians have provided compelling evidence for functional and anatomical differences in the brain systems engaged by musical training. It is not known, however, whether those differences result from long-term musical training or from pre-existing traits favoring musicality. In an attempt to begin addressing this question, we have launched a longitudinal investigation of the effects of childhood music training on cognitive, social and neural development. We compared a group of 6- to 7-year old children at the start of intense after-school musical training, with two groups of children: one involved in high intensity sports training but not musical training, another not involved in any systematic training. All children were tested with a comprehensive battery of cognitive, motor, musical, emotional, and social assessments and underwent magnetic resonance imaging and electroencephalography. Our first objective was to determine whether children who participate in musical training were different, prior to training, from children in the control groups in terms of cognitive, motor, musical, emotional, and social behavior measures as well as in structural and functional brain measures. Our second objective was to determine whether musical skills, as measured by a music perception assessment prior to training, correlates with emotional and social outcome measures that have been shown to be associated with musical training. We found no neural, cognitive, motor, emotional, or social differences among the three groups. In addition, there was no correlation between music perception skills and any of the social or emotional measures. These results provide a baseline for an ongoing longitudinal investigation of the effects of music training.

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High intelligence prevents the negative impact of anxiety on working memory

Adam Chuderski
Cognition and Emotion, forthcoming

Abstract:
Using a large sample and the confirmatory factor analysis, the study investigated the relationships between anxiety, working memory (WM) and (fluid) intelligence. The study showed that the negative impact of anxiety on WM functioning diminishes with increasing intelligence, and that anxiety can significantly affect WM only in people below average intelligence. This effect could not be fully explained by the sheer differences in WM capacity (WMC), suggesting the importance of higher-level cognition in coping with anxiety. Although intelligence moderated the impact of anxiety on WM, it was only weakly related to anxiety. In contrast to previous studies, anxiety explained the substantial amount of WMC variance (17.8%) in less intelligent participants, but none of the variance in more intelligent ones. These results can be explained in terms of either increased motivation of intelligent but anxious people to cope with a WM task, or their ability to compensate decrements in WM.

By KEVIN LEWIS | 09:00:00 AM


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