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Sunday, June 9, 2013

Kind of you

Compassion Training Alters Altruism and Neural Responses to Suffering

Helen Weng et al.
Psychological Science, forthcoming

Abstract:
Compassion is a key motivator of altruistic behavior, but little is known about individuals' capacity to cultivate compassion through training. We examined whether compassion may be systematically trained by testing whether (a) short-term compassion training increases altruistic behavior and (b) individual differences in altruism are associated with training-induced changes in neural responses to suffering. In healthy adults, we found that compassion training increased altruistic redistribution of funds to a victim encountered outside of the training context. Furthermore, increased altruistic behavior after compassion training was associated with altered activation in brain regions implicated in social cognition and emotion regulation, including the inferior parietal cortex and dorsolateral prefrontal cortex (DLPFC), and in DLPFC connectivity with the nucleus accumbens. These results suggest that compassion can be cultivated with training and that greater altruistic behavior may emerge from increased engagement of neural systems implicated in understanding the suffering of other people, executive and emotional control, and reward processing.

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Are Psychopaths and Heroes Twigs off the Same Branch? Evidence from College, Community, and Presidential Samples

Sarah Francis Smith et al.
Journal of Research in Personality, forthcoming

Abstract:
We examine the relation between psychopathy, especially its fearless dominance dimension, and heroism in two undergraduate samples (N=124 and 119), a community sample (N=457) and 42 U.S. presidents. The first undergraduate and community sample revealed significant positive correlations between fearless dominance and heroism and altruism toward strangers; the presidential sample provided some evidence for an association between fearless dominance and war heroism. In the second undergraduate sample, fearless dominance was related only to altruism toward strangers; heroism was instead significantly positively correlated with the impulsive antisociality component of psychopathy. These findings raise the possibility that some psychopathic personality traits are modestly associated with heightened levels of heroic altruism, and raise questions for future research on the personality correlates of heroism.

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Rational bystanders

Tobias Greitemeyer & Dirk Mügge
British Journal of Social Psychology, forthcoming

Abstract:
The bystander effect, the phenomenon that the (real or imagined) presence of others inhibits helping, has often been ascribed to bystanders' apathy. In the present research, we demonstrate that the occurrence of the bystander effect has rational roots. Three studies reveal that the presence of other bystanders does not inhibit helping when effective helping requires more than one help-giver. Mediation analyses showed that the bystander effect did not occur when many responses were needed because bystanders did not shift responsibility to others when in the presence of other bystanders. These findings suggest that the rational considerations underlying the bystander effect can mitigate the effects of the presence of other bystanders on helping behaviour when more than one help-giver is needed.

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Natural-field dictator game shows no altruistic giving

Jeffrey Winking & Nicholas Mizer
Evolution and Human Behavior, forthcoming

Abstract:
Economic experiments are increasingly being used in a number of research areas and are a major source of data guiding the debate surrounding the nature of human prosociality. The degree to which experiment behavior accurately reflects external behavior, however, has long been debated. A number of recent studies have revealed just how remarkably sensitive participants are to cues of a lack of anonymity. Similarly, others have suggested that the very structure of the experimental context induces participants to choose prosocial options. In order to truly create anonymous conditions and to eliminate the effects of experimental contexts, participants must not be aware of their participation. Here, I present the results of a natural-field Dictator Game in which participants are presented with a believable endowment and provided an opportunity to divide the endowment with a stranger without knowing that they are taking part in an experiment. No participants gave any portion of the endowment to the stranger. Baseline frequencies of prosocial behaviors exhibited under experimental contexts might therefore be substantially inflated compared to those exhibited under natural contexts.

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The external validity of giving in the dictator game

Axel Franzen & Sonja Pointner
Experimental Economics, June 2013, Pages 155-169

Abstract:
We investigate the external validity of giving in the dictator game by using the misdirected letter technique in a within-subject design. First, subjects participated in standard dictator games (double blind) conducted in labs in two different studies. Second, after four to five weeks (study 1) or two years (study 2), we delivered prepared letters to the same subjects. The envelopes and the contents of the letters were designed to create the impression that they were misdirected by the mail delivery service. The letters contained 10 Euros (20 Swiss Francs in study 2) corresponding to the endowment of the in-lab experiments. We observe in both studies that subjects who showed other-regarding behavior in the lab returned the misdirected letters more often than subjects giving nothing, suggesting that in-lab behavior is related to behavior in the field.

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Why Do People Volunteer? An Experimental Analysis of Preferences for Time Donations

Alexander Brown, Jonathan Meer & Forrest Williams
NBER Working Paper, May 2013

Abstract:
We conduct a laboratory experiment to test if there are differences in behavior when subjects can donate either time or money to charity. Our subjects perform an effort task to earn money. In one condition they can have their efforts accrue to a charity instead of themselves. In other conditions subjects may only earn money for their private account but then donate it to a charity. We vary the timing and availability of donation opportunities in the monetary donation settings to test the impact of subtle solicitation pressure. We find that subjects with more opportunities to donate will donate more often and in larger amounts. Further, subjects giving effort to charity give far more than subjects who give monetary donations - between two and five times as much, on average. We posit that this difference is driven by different warm glow from the two donation types.

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Perceived Utility (not Sympathy) Mediates the Proportion Dominance Effect in Helping Decisions

Arvid Erlandsson, Fredrik Björklund & Martin Bäckström
Journal of Behavioral Decision Making, forthcoming

Abstract:
The proportion dominance effect (PDE) refers to a higher motivation to help when the victims are part of a small (you can help 56 out of 60) rather than a large (you can help 56 out of 560) reference group. In two studies using different experimental paradigms, we investigated possible mediators of the PDE. Study 1 (N = 168) was conducted in three separate steps in order to test each link of the mediator model independently. Students read six vignettes where it was possible to help a fixed number of victims but where the size of the reference group was either small or large. When the reference group was small, helping motivation and perceived utility were higher, whereas sympathy toward the victims and perceived rights were not. A within-subject mediation analysis showed that perceived utility mediated the PDE. Study 2 (N = 36) presented four versions of a single helping situation in a joint evaluation mode where the size of the reference group became gradually smaller in each version. All participants compared and responded to each version. Helping motivation increased as the reference group became smaller, and this effect was mediated by perceived utility rather than by distress, sympathy, or perceived responsibilities. Our results suggest that unlike, for example, the identifiability and singularity effects, which have been suggested to be mediated by emotional reactions, the PDE is mediated by perceived utility.

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Small is beautiful - Experimental evidence of donors' preferences for charities

Sarah Borgloh, Astrid Dannenberg & Bodo Aretz
Economics Letters, August 2013, Pages 242-244

Abstract:
This paper studies the effect of information about a charity's size on individuals' donations to that charity. We conducted a framed field experiment with a non-student sample, in which subjects had the opportunity to donate to various charitable causes. The results show that if subjects are to choose between large organizations with high annual revenues and small organizations with low revenues, they prefer the small organizations, supporting thereby the predictions of the impact philanthropy model.

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Psychological Characteristics of Swedish Mandatory Enlisted Soldiers Volunteering and not Volunteering for International Missions: An Exploratory Study

Leif Rydstedt & Johan Österberg
Psychological Reports, April 2013, Pages 678-688

Abstract:
The purpose of this study was to assess personality traits, psychological fitness, and hardiness among conscript soldiers volunteering for international missions (n = 146), by comparing them with conscripts from the same year class and unit who did not apply for international missions (n = 275). The sample consisted of all mandatory enlisted soldiers assigned to a supply and maintenance regiment. There were no demographic differences between the groups. The volunteers reported greater stress tolerance, concern for others, extraversion, and self-confidence than the non-volunteers. There were no differences between the groups in orderliness, temper instability, or independence. Volunteers repeatedly reported greater psychological fitness for military missions and greater hardiness over the period of military service compared to the non-volunteers.

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The ultimate sacrifice: Perceived peer honor predicts troops' willingness to risk their lives

David Mandel & Amrit Litt
Group Processes & Intergroup Relations, May 2013, Pages 375-388

Abstract:
Honor is a central concept in the profession of arms. The present study of 2,254 Canadian Forces (CF) members examined how they viewed the honor of their peers at ranks below, at, or above their own. Although rank is itself a form of vertical honor, participants' mean assessments of honor were inversely related to these relative-rank distinctions. As well, averaged across vertical honor, the assessed honor of other CF members directly predicted their willingness to risk their lives in combat operations. This effect was fully mediated by participants' affective commitment to the CF and it was partially mediated by their sense of duty. The findings show that how professionals perceive the honor of their peers does not simply follow vertical indices of honor, and that those perceptions predict attitudinal states (e.g., affective commitment) and behavioral intentions (willingness to risk one's life to perform one's duties).

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Self-selection and variations in the laboratory measurement of other-regarding preferences across subject pools: Evidence from one college student and two adult samples

Jon Anderson et al.
Experimental Economics, June 2013, Pages 170-189

Abstract:
We measure the other-regarding behavior in samples from three related populations in the upper Midwest of the United States: college students, non-student adults from the community surrounding the college, and adult trainee truckers in a residential training program. The use of typical experimental economics recruitment procedures made the first two groups substantially self-selected. Because the context reduced the opportunity cost of participating dramatically, 91 % of the adult trainees solicited participated, leaving little scope for self-selection in this sample. We find no differences in the elicited other-regarding preferences between the self-selected adults and the adult trainees, suggesting that selection is unlikely to bias inferences about the prevalence of other-regarding preferences among non-student adult subjects. Our data also reject the more specific hypothesis that approval-seeking subjects are the ones most likely to select into experiments. Finally, we observe a large difference between self-selected college students and self-selected adults: the students appear considerably less pro-social.

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Do Grants to Charities Crowd Out Other Income? Evidence from the UK

James Andreoni, Abigail Payne & Sarah Smith
NBER Working Paper, April 2013

Abstract:
We present new evidence on the effect of grants on charities' incomes. We employ a novel identification strategy, focusing on charities that applied for lottery grant funding and comparing outcomes for successful and unsuccessful applicants. Overall, grants do not crowd out other income but the effect of grant-funding is not uniform. Looking in more detail we show first, that the positive effects of receiving a grant can persist for several years post-award; second, that grants have a stronger positive effect for small charities; and, third, that grants may have a more positive effect when they provide seed funding.

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Too smart to be selfish? Measures of cognitive ability, social preferences, and consistency

Chia-Ching Chen et al.
Journal of Economic Behavior & Organization, June 2013, Pages 112-122

Abstract:
Although there is an increasing interest in examining the relationship between cognitive ability and economic behavior, less is known about the relationship between cognitive ability and social preferences. We investigate the relationship between consequential measures of cognitive ability and measures of social preferences. We have data on a series of small-stakes dictator-type decisions, known as Social Value Orientation (SVO), in addition to choices in a larger-stakes dictator game. We also have access to the grade point averages (GPA) and SAT (formerly referred to as the Scholastic Aptitude Test) outcomes of our subjects. We find that subjects who perform better on the Math portion of the SAT are more generous in both the dictator game and the SVO measure. By contrast we find that subjects with a higher GPA are more selfish in the dictator game and more generous according to the SVO. We also find some evidence that the subjects with higher GPA and higher SAT outcomes offer more consistent responses. Our results involving GPA and social preferences complement previous work which employ measures of cognitive ability which are sensitive to the intrinsic motivation of the subject. Our results involving SAT scores are without precedent in the literature and suggest that measures of cognitive ability, which are less sensitive to the intrinsic motivation of the subject, are positively related to generosity.

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Identifying Social Norms Using Coordination Games: Why Does Dictator Game Sharing Vary?

Erin Krupka & Roberto Weber
Journal of the European Economic Association, June 2013, Pages 495-524

Abstract:
We introduce an incentivized elicitation method for identifying social norms that uses simple coordination games. We demonstrate that concern for the norms we elicit and for money predict changes in behavior across several variants of the dictator game, including data from a novel experiment and from prior published laboratory studies, that are unaccounted for by most current theories of social preferences. Moreover, we find that the importance of social norm compliance and of monetary considerations is fairly constant across different experiments. This consistency allows prediction of treatment effects across experiments, and implies that subjects have a generally stable willingness to sacrifice money to take behaviors that are socially appropriate.

By KEVIN LEWIS | 09:00:00 AM

Saturday, June 8, 2013

Making calls

Perceived Hotness Affects Behavior of Basketball Players and Coaches

Yigal Attali
Psychological Science, forthcoming

Abstract:
Although "hot hands" in basketball are illusory, the belief in them is so robust that it not only has sparked many debates but may also affect the behavior of players and coaches. On the basis of an entire National Basketball Association season's worth of data, the research reported here shows that even a single successful shot suffices to increase a player's likelihood of taking the next team shot, increase the average distance from which this next shot is taken, decrease the probability that this next shot is successful, and decrease the probability that the coach will replace the player.

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The pricing of soft and hard information: Economic lessons from screenplay sales

William Goetzmann, Abraham Ravid & Ronald Sverdlove
Journal of Cultural Economics, May 2013, Pages 271-307

Abstract:
This paper uses a unique data set on screenplay sales to learn how the information content of a sales pitch affects sale prices. This is one of the few studies that analyze "soft information" outside the banking industry. We find that "soft information" proxies, such as the descriptive complexity of a pitch, depress prices, in particular for less experienced writers, supporting the common industry view that high concept (short and simple) screenplays sell better. "Hard information" (measurable experience) variables are priced as well. We also find that large studios shun "soft information", whereas small companies handle it better, as predicted by most theories. In the last part of the paper, we find that, surprisingly, buyers seem to be able to forecast the eventual success of a project based upon the purchased script, paying more for screenplays which will eventually culminate in more successful movies. In other words, perhaps "somebody knows something".

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The Hobgoblin of Consistency: Algorithmic Judgment Strategies Underlie Inflated Self-Assessments of Performance

Elanor Williams, David Dunning & Justin Kruger
Journal of Personality and Social Psychology, June 2013, Pages 976-994

Abstract:
People often hold inflated views of their performance on intellectual tasks, with poor performers exhibiting the most inflation. What leads to such excessive confidence? We suggest that the more people approach such tasks in a "rational" (i.e., consistent, algorithmic) manner, relative to those who use more variable or ad hoc approaches, the more confident they become, irrespective of whether they are reaching correct judgments. In 6 studies, participants completed tests involving logical reasoning, intuitive physics, or financial investment. Those more consistent in their approach to the task rated their performances more positively, including those consistently pursuing the wrong rule. Indeed, completely consistent but wrong participants thought almost as highly of their performance as did completely consistent and correct participants. Participants were largely aware of the rules they followed and became more confident in their performance when induced to be more systematic in their approach, no matter how misguided that approach was. In part, the link between decision consistency and (over)confidence was mediated by a neglect of alternative solutions as participants followed a more uniform approach to a task.

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The Devil Is in the Specificity: The Negative Effect of Prediction Specificity on Prediction Accuracy

Song-Oh Yoon et al.
Psychological Science, forthcoming

Abstract:
In the research reported here, we proposed and demonstrated the prediction-specificity effect, which states that people's prediction of the general outcome of an event (e.g., the winner of a soccer match) is less accurate when the prediction question is framed in a more specific manner (e.g., guessing the score) rather than in a less specific manner (e.g., guessing the winner). We demonstrated this effect by examining people's predictions on actual sports games both in field and laboratory studies. In Study 1, the analysis of 19 billion bets from a commercial sports-betting business provided evidence for the effect of prediction specificity. This effect was replicated in three controlled laboratory studies, in which participants predicted the outcomes of a series of soccer matches. Furthermore, the negative effect of prediction specificity was mediated by participants' underweighting of important holistic information during decision making.

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Opening the Closed Mind: The Effect of Exposure to Literature on the Need for Closure

Maja Djikic, Keith Oatley & Mihnea Moldoveanu
Creativity Research Journal, Spring 2013, Pages 149-154

Abstract:
The need for cognitive closure has been found to be associated with a variety of suboptimal information processing strategies, leading to decreased creativity and rationality. This experiment tested the hypothesis that exposure to fictional short stories, as compared with exposure to nonfictional essays, will reduce need for cognitive closure. One hundred participants were assigned to read either an essay or a short story (out of a set of 8 essays and 8 short stories matched for length, reading difficulty, and interest). After reading, their need for cognitive closure was assessed. As hypothesized, when compared to participants in the essay condition, participants in the short story condition experienced a significant decrease in self-reported need for cognitive closure. The effect was particularly strong for participants who were habitual readers (of either fiction or non-fiction). These findings suggest that reading fictional literature could lead to better procedures of processing information generally, including those of creativity.

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Information Processing Constraints and Asset Mispricing

Alasdair Brown
Economic Journal, forthcoming

Abstract:
I analyse a series of natural quasi-experiments -- centered on betting exchange data on the Wimbledon Tennis Championships -- to determine whether information processing constraints are partially responsible for mispricing in asset markets. I find that the arrival of information during each match leads to substantial mispricing between two equivalent assets, and that part of this mispricing can be attributed to differences in the frequency with which the two prices are updated in play. This suggests that information processing constraints force the periodic neglect of one of the assets, thereby causing substantial, albeit temporary, mispricing in this simple asset market.

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The Effectiveness of Airline Pilot Training for Abnormal Events

Stephen Casner, Richard Geven & Kent Williams
Human Factors, June 2013, Pages 477-485

Objective: To evaluate the effectiveness of airline pilot training for abnormal in-flight events.

Background: Numerous accident reports describe situations in which pilots responded to abnormal events in ways that were different from what they had practiced many times before. One explanation for these missteps is that training and testing for these skills have become a highly predictable routine for pilots who arrive to the training environment well aware of what to expect. Under these circumstances, pilots get plentiful practice in responding to abnormal events but may get little practice in recognizing them and deciding which responses to offer.

Method: We presented 18 airline pilots with three abnormal events that are required during periodic training and testing. Pilots were presented with each event under the familiar circumstances used during training and also under less predictable circumstances as they might occur during flight.

Results: When presented in the routine ways seen during training, pilots gave appropriate responses and showed little variability. However, when the abnormal events were presented unexpectedly, pilots' responses were less appropriate and showed great variability from pilot to pilot.

Conclusion: The results suggest that the training and testing practices used in airline training may result in rote-memorized skills that are specific to the training situation and that offer modest generalizability to other situations. We recommend a more complete treatment of abnormal events that allows pilots to practice recognizing the event and choosing and recalling the appropriate response.

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Short- and Long-Term Effects of Conscious, Minimally Conscious and Unconscious Brand Logos

Charlotte Muscarella et al.
PLoS ONE, May 2013

Abstract:
Unconsciously presented information can influence our behavior in an experimental context. However, whether these effects can be translated to a daily life context, such as advertising, is strongly debated. What hampers this translation is the widely accepted notion of the short-livedness of unconscious representations. The effect of unconscious information on behavior is assumed to rapidly vanish within a few hundreds of milliseconds. Using highly familiar brand logos (e.g., the logo of McDonald's) as subliminal and supraliminal primes in two priming experiments, we assessed whether these logos were able to elicit behavioral effects after a short (e.g., 350 ms), a medium (e.g., 1000 ms), and a long (e.g., 5000 ms) interval. Our results demonstrate that when real-life information is presented minimally consciously or even unconsciously, it can influence our subsequent behavior, even when more than five seconds pass between the presentation of the minimally conscious or unconscious information and the behavior on which it exerts its influence.

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Enhanced Cardiac Perception Is Associated With Increased Susceptibility to Framing Effects

Stefan Sütterlin et al.
Cognitive Science, forthcoming

Abstract:
Previous studies suggest in line with dual process models that interoceptive skills affect controlled decisions via automatic or implicit processing. The "framing effect" is considered to capture implicit effects of task-irrelevant emotional stimuli on decision-making. We hypothesized that cardiac awareness, as a measure of interoceptive skills, is positively associated with susceptibility to the framing effect. Forty volunteers performed a risky-choice framing task in which the effect of loss versus gain frames on decisions based on identical information was assessed. The results show a positive association between cardiac awareness and the framing effect, accounting for 24% of the variance in the framing effect. These findings demonstrate that good interoceptive skills are linked to poorer performance in risky choices based on ambivalent information when implicit bias is induced by task-irrelevant emotional information. These findings support a dual process perspective on decision-making and suggest that interoceptive skills mediate effects of implicit bias on decisions.

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Gist Memory in the Unconscious-Thought Effect

Marlène Abadie, Laurent Waroquier & Patrice Terrier
Psychological Science, forthcoming

Abstract:
The unconscious-thought effect (UTE) occurs when people are better able to make complex decisions after a period of distraction rather than immediately or after a period of conscious deliberation. This finding has often been interpreted as evidence of unconscious thinking. In two experiments, we provided the first evidence that the UTE is accompanied by enhanced memory for the gist of decision-relevant attributes and demonstrated that the cognitive demands of a distraction task moderate its effect on decision making and gist memory. It was only following a low-demand distraction task that participants chose the best alternative more often and displayed enhanced gist memory for decision-relevant attributes. These findings suggest that the UTE occurs only if cognitive resources are available and that it is accompanied by enhanced organization of information in memory, as shown by the increase in gist memory.

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Impartiality in humans is predicted by brain structure of dorsomedial prefrontal cortex

Thomas Baumgartner et al.
NeuroImage, 1 November 2013, Pages 317-324

Abstract:
The moral force of impartiality (i.e. the equal treatment of all human beings) is imperative for providing justice and fairness. Yet, in reality many people become partial during intergroup interactions; they demonstrate a preferential treatment of ingroup members and a discriminatory treatment of outgroup members. Some people, however, do not show this intergroup bias. The underlying sources of these inter-individual differences are poorly understood. Here we demonstrate that the larger the gray matter volume and thickness of the dorsomedial prefrontal cortex (DMPFC), the more individuals in the role of an uninvolved third-party impartially punish outgroup and ingroup perpetrators. Moreover, we show evidence for a possible mechanism that explains the impact of DMPFC's gray matter volume on impartiality, namely perspective-taking. Large gray matter volume of DMPFC seems to facilitate equal perspective-taking of all sides, which in turn leads to impartial behavior. This is the first evidence demonstrating that brain structure of the DMPFC constitutes an important source underlying an individual's propensity for impartiality.

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The power of precise numbers: A conversational logic analysis

Charles Zhang & Norbert Schwarz
Journal of Experimental Social Psychology, forthcoming

Abstract:
The role of conversational processes in quantitative judgment is addressed. In three studies, precise numbers (e.g., $29.75) had a stronger influence on subsequent estimates than round numbers (e.g., $30), but only when they were presented by a human communicator whose contributions could be assumed to observe the Gricean maxims of cooperative conversational conduct. Numeric precision exerted no influence when the numbers were presented as the result of an automated procedure that lacks communicative intent (Study 1) or when the level of precision was pragmatically irrelevant for the estimation task (Study 2).

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Limits in decision making arise from limits in memory retrieval

Gyslain Giguère & Bradley Love
Proceedings of the National Academy of Sciences, 7 May 2013, Pages 7613-7618

Abstract:
Some decisions, such as predicting the winner of a baseball game, are challenging in part because outcomes are probabilistic. When making such decisions, one view is that humans stochastically and selectively retrieve a small set of relevant memories that provides evidence for competing options. We show that optimal performance at test is impossible when retrieving information in this fashion, no matter how extensive training is, because limited retrieval introduces noise into the decision process that cannot be overcome. One implication is that people should be more accurate in predicting future events when trained on idealized rather than on the actual distributions of items. In other words, we predict the best way to convey information to people is to present it in a distorted, idealized form. Idealization of training distributions is predicted to reduce the harmful noise induced by immutable bottlenecks in people's memory retrieval processes. In contrast, machine learning systems that selectively weight (i.e., retrieve) all training examples at test should not benefit from idealization. These conjectures are strongly supported by several studies and supporting analyses. Unlike machine systems, people's test performance on a target distribution is higher when they are trained on an idealized version of the distribution rather than on the actual target distribution. Optimal machine classifiers modified to selectively and stochastically sample from memory match the pattern of human performance. These results suggest firm limits on human rationality and have broad implications for how to train humans tasked with important classification decisions, such as radiologists, baggage screeners, intelligence analysts, and gamblers.

By KEVIN LEWIS | 09:00:00 AM

Friday, June 7, 2013

Nanny diaries

Economic Experts versus Average Americans

Paola Sapienza & Luigi Zingales
American Economic Review, May 2013, Pages 636-642

Abstract:
We compare answers to policy questions by economic experts and a representative sample of the US population. We find a 35 percentage point difference between the two groups. This gap is only partially explained by differences in ideological or personal characteristics of the two samples. Interestingly, the difference is the largest on the questions where economists agree the most and where there is the largest amount of literature. Informing people of the expert opinions does not seem to have much of an impact. Ordinary people seem to be skeptical of the implicit assumptions embedded into the economists' answers.

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Education and support for scientists and elected officials in public policy decisions

Timothy O'Brien
Science and Public Policy, June 2013, Pages 340-353

Abstract:
This paper uses survey data from the United States to examine the relationship between education and public support for scientific experts and elected leaders in knowledge-intensive policy decisions. Results show that most individuals agree that scientists should have more influence than elected leaders over public policy related to global warming, stem cell research, genetically modified food, and nuclear energy. However, compared to those with less schooling, college graduates are up to nearly three times more likely to express the minority opinion that elected leaders should have policy priority. The analysis shows that this pattern results primarily from college graduates' increased support for elected officials rather than decreased support for scientists. Findings provide evidence for democratic theory, and more generally, highlight the value of incorporating political theory in empirical research on science and public policy.

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Court-Appointed Neutral Economic Experts

Gregory Sidak
Journal of Competition Law & Economics, June 2013, Pages 359-394

Abstract:
Complex civil litigation routinely includes expert economic testimony. However, it may be hard for a jury to determine at trial which expert economist is more credible, and it may be hard for the judge to determine at the Daubert hearing whether the methodology upon which a given expert economist relies is intellectually rigorous enough to produce results that constitute admissible testimony. One solution rarely employed is for the court to appoint its own neutral economic expert under Rule 706 of the Federal Rules of Evidence when a lawsuit contains a claim for damages that will require rigorous analysis of data. Based on my recent experience as Judge Richard Posner's court-appointed economic expert on damages in patent infringement litigation, I explain how the wider use of Rule 706 would assist the judge and jury and would facilitate the prompt settlement of intellectual property, antitrust, securities, contract, business tort, and other complex disputes. The benefits to courts and litigants would surely exceed the costs.

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Competition and Unconscionability

Ezra Friedman
American Law and Economics Review, forthcoming

Abstract:
This paper argues that the conventional legal doctrine that emphasizes lack of choice among suppliers or contracts as an element of unconscionability is misguided. I show that when a seller with significant market power offers only one contract, fear of alienating sophisticated customers can discourage the seller from exploiting the unsophisticated with an inefficient contract. In contrast, competitive sellers may lose money on sophisticated customers, and be willing to sacrifice them in order to exploit the unsophisticated. Likewise, offering a choice of contracts enables sellers to exploit the unsophisticated while offering an efficient contract to the sophisticated.

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Using the Right Yardstick: Assessing Financial Literacy Measures by Way of Financial Well-Being

Maximilian Schmeiser & Jason Seligman
Journal of Consumer Affairs, forthcoming

Abstract:
Despite the proliferation of academic studies examining financial literacy and financial outcomes, no consistent definition or empirically validated measures of financial literacy exist. While a handful of questions have become the standard measures of financial literacy in previous research, little work has been done examining whether responses to these questions accurately capture underlying financial capability, or whether they causally relate to subsequent financial well-being. Taking advantage of longitudinal data from the Health and Retirement Study we examine whether some of the questions previously used as measures of financial literacy are consistent measures of financial knowledge and effective predictors of future changes in wealth. We find that respondents frequently do not consistently answer questions across survey waves and that the context in which a question is asked affects the likelihood of correctly responding. Moreover, our regression analyses suggest that correctly answering these questions, consistently or not, has little significant relationship to changes in wealth over time, and is often related to a decrease in future wealth. Our findings should give pause to researchers using the financial literacy questions examined here, particularly from cross-sectional data.

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Borrowing High vs. Borrowing Higher: Sources and Consequences of Dispersion in Individual Borrowing Costs

Victor Stango & Jonathan Zinman
NBER Working Paper, May 2013

Abstract:
We document cross-individual variation in U.S. credit card borrowing costs (APRs) that is large enough to explain substantial differences in household saving rates. Borrower default risk and card characteristics explain roughly 40% of APRs. The remaining dispersion exists because a borrower can receive offers and hold cards with wide-ranging APRs, as different issuers price the same observable risk metrics quite differently. Borrower debt (mis)allocation across cards explains little dispersion. But self-reported borrower search/shopping (along with instruments for shopping implied by Fair Lending law) can explain APR differences comparable to moving someone from the worst credit score decile to the best.

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Consumer Misunderstanding of Credit Card Use, Payments, and Debt: Causes and Solutions

Jack Soll, Ralph Keeney & Richard Larrick
Journal of Public Policy & Marketing, May 2013, Pages 66-81

Abstract:
The authors identify several judgmental biases related to paying off credit card debt. Participants with stronger numerical skills made fewer errors, as did those who used the new statement format mandated by Congress in the CARD Act of 2009. Study 1 shows that people underestimate how long it takes to eliminate a debt when payments barely cover interest owed. Study 2 shows that less numerate people tend to underestimate the monthly payment required to pay off a debt in three years, whereas more numerate people tend to overestimate the payment. The newly revised statement required by the CARD Act substantially reduced these biases. However, even with the new statement, many people still underestimate required payments when still using the credit card. Study 3 identifies ambiguities in the revised statement that can lead to misjudgments about how much to pay on monthly bills. The authors recommend additional public policy actions to help cardholders understand the relationship between payments and debt elimination.

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Corporate Lobbying, Political Connections, and the Bailout of Banks

Benjamin Blau, Tyler Brough & Diana Thomas
Journal of Banking & Finance, August 2013, Pages 3007-3017

Abstract:
Political involvement has long been shown to be a profitable investment for firms that seek favorable regulatory conditions or support in times of economic distress. But how important are different types of political involvement for the timing and magnitude of political support? To answer this question, we take a comprehensive look at the lobbying expenditures and political connections of banks that were recipients of government support under the 2008 Troubled Asset Relief Program (TARP). We find that politically-engaged firms were not only more likely to receive TARP support, but they also received a greater amount of TARP support and received the support earlier than firms that were not politically involved.

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Executive Compensation and Business Policy Choices at U.S. Commercial Banks

Robert DeYoung, Emma Peng & Meng Yan
Journal of Financial and Quantitative Analysis, February 2013, Pages 165-196

Abstract:
We show that contractual risk-taking incentives for chief executive officers (CEOs) increased at large U.S. commercial banks around 2000, when industry deregulation expanded these banks' growth opportunities. Our econometric models indicate that CEOs responded positively to these incentives, especially at the larger banks best able to take advantage of these opportunities. Our results also suggest that bank boards responded to higher-than-average levels of risk by moderating CEO risk-taking incentives; however, this feedback effect is absent at the very largest banks with strong growth opportunities and a history of highly aggressive risk-taking incentives.

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Scandal Enforcement at the SEC: The Arc of the Option Backdating Investigations

Stephen Choi, Anat Carmy Wiechman & A.C. Pritchard
American Law and Economics Review, forthcoming

Abstract:
We study the Securities and Exchange Commission's (SEC) enforcement decisions in the context of the highly salient back-dating scandal. We find that (1) the SEC shifted its mix of investigations significantly toward backdating and away from other accounting issues; (2) event studies of stock market reactions to the initial disclosure of backdating investigations shows that those reactions declined over our sample period; (3) later backdating investigations are less likely to target individuals and be accompanied by a parallel criminal investigation; (4) later investigations were more likely to be terminated or produce no monetary penalties; and (5) the magnitude of the option backdating accounting errors diminished over time relative to other accounting errors that drew SEC scrutiny. Although we cannot directly test whether the SEC substituted toward lower-stake (but more salient) cases, the evidence presented here strongly suggests that the agency did so.

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Sarbanes-Oxley Act and Corporate Credit Spreads

Ali Nejadmalayeri, Takeshi Nishikawa & Ramesh Rao
Journal of Banking & Finance, August 2013, Pages 2991-3006

Abstract:
Stock market reaction suggests that despite improved disclosure and increased accountability, Sarbanes-Oxley Act (SOX) is too costly and not beneficial. Noting that bondholders are likely to reap the many potential benefits of SOX without bearing the brunt of costs, we examine how SOX affected corporate credit spreads to better assess its benefits. SOX has led to a significant structural decline in spreads of at least 27 basis points. Riskier firms (low rating, long maturity, high leverage, and small size) and firms closely related to SOX major provisions (earning variability, managerial trading, and corporate governance) experience greater declines in spreads.

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Finance and Competition

Harris Dellas & Ana Fernandes
Economic Journal, forthcoming

Abstract:
We investigate the role of financial constraints for product market competition in a general equilibrium model, where firms may differ in terms of own wealth and/or efficiency. We find that, in general, the amelioration of financial constraints increases competition (it lowers the Lerner index of markups) in financially dependent sectors even when other standard concentration indexes indicate otherwise. Our analysis implies that disruptions in financial markets (such as the recent financial crisis) may have adverse effects on competition in product markets, a cost that has not been identified before.

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Federal regulation and aggregate economic growth

John Dawson & John Seater
Journal of Economic Growth, June 2013, Pages 137-177

Abstract:
We introduce a new time series measure of the extent of federal regulation in the U.S. and use it to investigate the relationship between federal regulation and macroeconomic performance. We find that regulation has statistically and economically significant effects on aggregate output and the factors that produce it - total factor productivity (TFP), physical capital, and labor. Regulation has caused substantial reductions in the growth rates of both output and TFP and has had effects on the trends in capital and labor that vary over time in both sign and magnitude. Regulation also affects deviations about the trends in output and its factors of production, and the effects differ across dependent variables. Regulation changes the way output is produced by changing the mix of inputs. Changes in regulation offer a straightforward explanation for the productivity slowdown of the 1970s. Qualitatively and quantitatively, our results agree with those obtained from cross-section and panel measures of regulation using cross-country data.

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Financial dependence, global growth opportunities, and growth revisited

Simone Manganelli & Alexander Popov
Economics Letters, July 2013, Pages 123-125

Abstract:
We show that financial development has a non-monotonic effect on growth in the Rajan and Zingales (1998) and Fisman and Love (2007) sample. Beyond a threshold, financially dependent industries and industries facing good growth opportunities grow disproportionately more slowly.

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The regulator's trade-off: Bank supervision vs. minimum capital

Florian Buck & Eva Schliephake
Journal of Banking & Finance, forthcoming

Abstract:
We develop a simple model of banking regulation with two policy instruments: minimum capital requirements and the supervision of domestic banks. The regulator faces a trade-off: high capital requirements cause a drop in the banks' profitability, whereas strict supervision reduces the scope of intermediation and is costly for taxpayers. We show that a mix of both instruments minimises the costs of preventing the collapse of financial intermediation. Once we allow for cross-border banking, the optimal policy is not feasible. If domestic supervisory effort is not observable, our model predicts a race to the bottom in capital requirement regulation. Therefore, countries are better off by harmonising regulation on an international standard.

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Testing Enforcement Strategies in the Field: Threat, Moral Appeal and Social Information

Gerlinde Fellner, Rupert Sausgruber & Christian Traxler
Journal of the European Economic Association, June 2013, Pages 634-660

Abstract:
We run a large-scale natural field experiment to evaluate alternative strategies to enforce compliance with the law. The experiment varies the text of mailings sent to potential evaders of TV license fees. We find a strong effect of mailings, leading to a substantial increase in compliance. Among different mailings, a threat treatment which makes a high detection risk salient has a significant deterrent effect. Neither appealing to morals nor imparting information about others' behavior enhances compliance on aggregate. However, the information condition has a weak positive effect in municipalities where evasion is believed to be common.

By KEVIN LEWIS | 09:00:00 AM

Thursday, June 6, 2013

Out of work

Does High Home-Ownership Impair the Labor Market?

David Blanchflower & Andrew Oswald
NBER Working Paper, May 2013

Abstract:
We explore the hypothesis that high home-ownership damages the labor market. Our results are relevant to, and may be worrying for, a range of policy-makers and researchers. We find that rises in the home- ownership rate in a U.S. state are a precursor to eventual sharp rises in unemployment in that state. The elasticity exceeds unity: a doubling of the rate of home-ownership in a U.S. state is followed in the long-run by more than a doubling of the later unemployment rate. What mechanism might explain this? We show that rises in home-ownership lead to three problems: (i) lower levels of labor mobility, (ii) greater commuting times, and (iii) fewer new businesses. Our argument is not that owners themselves are disproportionately unemployed. The evidence suggests, instead, that the housing market can produce negative 'externalities' upon the labor market. The time lags are long. That gradualness may explain why these important patterns are so little-known.

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Why Do Unemployed Americans Blame Themselves While Israelis Blame the System?

Ofer Sharone
Social Forces, June 2013, Pages 1429-1450

Abstract:
This article provides a new account of American job seekers' individualized understandings of their labor-market difficulties, and more broadly, of how structural conditions shape subjective responses. Unemployed white-collar workers in the U.S. tend to interpret their labor market difficulties as reflecting flaws in themselves, while Israelis tend to perceive flaws in the hiring system. These different responses have profound individual and societal implications. Drawing on in-depth interviews with unemployed job seekers and participant observations at support groups in the U.S. and Israel, this article shows how different labor market institutions give rise to distinct job search games, which I call the chemistry game in the U.S. and the specs game in Israel. Challenging the broad cultural explanations of the unemployment experience in the existing literature, this article shows how subjective responses to unemployment are generated by the search experiences associated with institutionally rooted job search games.

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Duration Dependence and Labor Market Conditions: Evidence from a Field Experiment

Kory Kroft, Fabian Lange & Matthew Notowidigdo
Quarterly Journal of Economics, forthcoming

Abstract:
This paper studies the role of employer behavior in generating "negative duration dependence" - the adverse effect of a longer unemployment spell - by sending fictitious resumes to real job postings in 100 U.S. cities. Our results indicate that the likelihood of receiving a callback for an interview significantly decreases with the length of a worker's unemployment spell, with the majority of this decline occurring during the first eight months. We explore how this effect varies with local labor market conditions and find that duration dependence is stronger when the local labor market is tighter. This result is consistent with the prediction of a broad class of screening models in which employers use the unemployment spell length as a signal of unobserved productivity and recognize that this signal is less informative in weak labor markets.

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House Lock and Structural Unemployment

Robert Valletta
Labour Economics, forthcoming

Abstract:
A recent decline in internal migration in the United States may have been caused in part by falling house prices, through the "lock in" effects of financial constraints faced by households whose housing debt exceeds the market value of their home. I analyse the relationship between such "house lock" and the elevated levels and persistence of unemployment during the recent recession and its aftermath, using data for the years 2008-11. Because house lock is likely to extend job search in the local labour market for homeowners whose home value has declined, I focus on differences in unemployment duration between homeowners and renters across geographic areas differentiated by the severity of the decline in home prices. The empirical analyses rely on microdata from the monthly Current Population Survey (CPS) files and an econometric method that enables the estimation of individual and aggregate covariate effects on unemployment durations using repeated cross-section data. I do not uncover systematic evidence to support the house-lock hypothesis.

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The American Recovery and Reinvestment Act: Solely A Government Jobs Program?

Timothy Conley & Bill Dupor
Journal of Monetary Economics, forthcoming

Abstract:
This paper estimates the private and government sector employment effects of American Recovery and Reinvestment Act (ARRA) spending via an instrumental variables strategy. We argue that this aid was effectively fungible and states used it to offset declines in revenue. This enables us to use exogenous variation in states' budget positions to identify the Act's employment effects. We also exploit exogenous variation across states in ARRA highway funding. According to our benchmark estimates, average state and local government employment, during the twenty-four months following the program's inception, was between 156 thousand and 563 thousand persons greater as a result of ARRA spending (90% confidence interval). The corresponding estimate for the private sector ranges from a loss of 182 thousand to a gain of 1.1 million jobs. Our point estimate for the implied cost of creating a job lasting one year is $202 thousand, which is substantially larger than the corresponding estimate from the President's Council of Economic Advisors.

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Comparisons of Weekly Hours over the Past Century and the Importance of Work-Sharing Policies in the 1930s

Todd Neumann & Jason Taylor & Price Fishback
American Economic Review, May 2013, Pages 105-110

Abstract:
Changes in the work week drove a larger portion of changes in total labor input during the Great Depression of the 1930s than during other decades. Work-sharing policies appear to be responsible. Herbert Hoover created various work-sharing committees -- led by key industrialists -- which pushed for shorter work weeks. And Franklin Roosevelt's President's Reemployment Agreement called for sharp cuts in weekly work hours. Spreading available work amongst more people was the goal. During these periods between 50 and 90 percent of declines in labor input were accommodated by falling hours. In recent decades employers have instead relied on layoffs to achieve the same end.

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Do Extended Unemployment Benefits Lengthen Unemployment Spells? Evidence from Recent Cycles in the U.S. Labor Market

Henry Farber & Robert Valletta
NBER Working Paper, May 2013

Abstract:
In response to the Great Recession, the availability of unemployment insurance (UI) benefits was extended to an unprecedented 99 weeks in many U.S. states in the 2009-2012 period. We use matched monthly data from the CPS to exploit variation in the timing and size of the UI benefit extensions across states to estimate the overall impact of these extensions on individual exit from unemployment, and we compare the estimated impact with that for the prior extension of benefits during the much milder downturn in the early 2000s. In both periods, we find a small but statistically significant reduction in the unemployment exit rate and a small increase in the expected duration of unemployment. The effects on exits and duration are primarily due to a reduction in exits from the labor force rather than to a decrease in exits to employment (the job finding rate). Although the overall effect of UI extensions on exit from unemployment is small, it implies a substantial effect of extended benefits on the steady-state share of unemployment in the cross-section that is long-term.

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Overeducation at the Start of the Career: Stepping Stone or Trap?

Stijn Baert, Bart Cockx & Dieter Verhaest
Labour Economics, forthcoming

Abstract:
This study investigates whether young unemployed graduates who accept a job below their level of education accelerate or delay the transition into a job that matches their level of education. We adopt the Timing of Events approach to identify this dynamic treatment effect using monthly calendar data from a representative sample of Flemish (Belgian) youth who started searching for a job right after leaving formal education. We find that overeducation is a trap. By accepting a job for which one is overeducated rather than only accepting adequate job matches, monthly transition rates into adequate employment fall by 51-98%, depending on the elapsed unemployment duration. These findings challenge the career mobility thesis and imply that the short-term benefits of policies that generate quick transitions into employment must be traded-off against the long-term costs of an inadequate job match.

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Interstate Variations in Private Sector Union Density in the U.S.

Behroz Baraghoshi & Cihan Bilginsoy
Journal of Labor Research, June 2013, Pages 180-202

Abstract:
This paper uses union density variations across state and state-industry cells in 1985, 1995, and 2005 to examine the factors that contributed to the decline in private sector unionization in the U.S. In addition to the conventional variables, it develops two measures to gauge the effects of union-management strife. Estimations indicate that union density varied directly with union organizing efforts and inversely with the employer opposition to unionization. Decomposition analysis reveals, however, that these variables do not explain why union density declined because changes in their marginal effects were favorable to unionization. Declining union density instead is attributable mostly to the shift factors subsumed under the intercept term over 1985-1995, and shift factors cum negative changes in sensitivity of unionization to workforce characteristics over 1995-2005.

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Analyzing the Extent and Influence of Occupational Licensing on the Labor Market

Morris Kleiner & Alan Krueger
Journal of Labor Economics, April 2013, Pages S173-S202

Abstract:
This study examines occupational licensing in the United States using a specially designed national labor force survey. Estimates from the survey indicated that 35% of employees were either licensed or certified by the government and that 29% were licensed. Another 3% stated that all who worked in their job would eventually be required to be certified or licensed, bringing the total that are or eventually must be licensed or certified by government to 38%. We find that licensing is associated with about 18% higher wages but that the effect of governmental certification on pay is much smaller.

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Wage Effects of Unionization and Occupational Licensing Coverage in the United States

Maury Gittleman & Morris Kleiner
NBER Working Paper, May 2013

Abstract:
Recent estimates in standard models of wage determination for both unionization and occupational licensing have shown wage effects that are similar across the two institutions. These cross-sectional estimates use specialized data sets, with small sample sizes, for the period 2006 through 2008. Our analysis examines the impact of unions and licensing coverage on wage determination using new data collected on licensing statutes that are then linked to longitudinal data from the National Longitudinal Survey of Youth (NLSY79) from 1979 to 2010. We develop several approaches, using both cross-sectional and longitudinal analyses, to measure the impact of these two labor market institutions on wage determination. Our estimates of the economic returns to union coverage are greater than those for licensing requirements.

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The Effect of Public Sector Employment on Local Labour Markets

Giulia Faggio & Henry Overman
Journal of Urban Economics, forthcoming

Abstract:
This paper considers the impact of public sector employment on local labour markets. Using English data at the Local Authority level for 2003 to 2007 we find that public sector employment has no identifiable effect on total private sector employment. However, public sector employment does affect the sectoral composition of the private sector. Specifically, each additional public sector job creates 0.5 jobs in the nontradable sector (construction and services) while crowding out 0.4 jobs in the tradable sector (manufacturing). When using data for a longer time period (1999 to 2007) we find no multiplier effect for nontradables, stronger crowding out for tradables and, consistent with this, crowding out for total private sector employment.

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Life satisfaction and self-employment: A matching approach

Martin Binder & Alex Coad
Small Business Economics, May 2013, Pages 1009-1033

Abstract:
Despite lower incomes, the self-employed consistently report higher satisfaction with their jobs. But are self-employed individuals also happier, more satisfied with their lives as a whole? High job satisfaction might cause them to neglect other important domains of life, such that the fulfilling job crowds out other pleasures, leaving the individual on the whole not happier than others. Moreover, self-employment is often chosen to escape unemployment, not for the associated autonomy that seems to account for the high job satisfaction. We apply matching estimators that allow us to better take into account the above-mentioned considerations and construct an appropriate control group (in terms of balanced covariates). Using the BHPS dataset that comprises a large nationally representative sample of the British populace, we find that individuals who move from regular employment into self-employment experience an increase in life satisfaction (up to 2 years later), while individuals moving from unemployment to self-employment are not more satisfied than their counterparts moving from unemployment to regular employment. We argue that these groups correspond to "opportunity" and "necessity" entrepreneurship, respectively. These findings are robust with regard to different measures of subjective well-being as well as choice of matching variables, and also robustness exercises involving "simulated confounders".

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Employment sector and pay gaps: Genetic and environmental influences

Terhi Maczulskij
Labour Economics, August 2013, Pages 89-96

Abstract:
This paper uses data on Finnish twins to examine two questions regarding public sector labour markets. First, what are the genetic and environmental contributions to being a public sector employee, and second, are there wage gaps between public and private sector employees. The results indicate that 34 to 40 per cent of the observed variance in the tendency to be a public sector employee can be attributed to genetic factors, with no influence of the shared environment. Furthermore, at least one-third of the genetic variance is mediated through educational attainment. The results from the wage gap analysis suggest that OLS estimates are downward biased. In fact, while OLS estimates indicate a negative wage gap for both males (seven per cent) and females (four per cent), the within-twin estimates do not indicate any inequalities with respect to pay offered by the two sectors.

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Labor Markets and Mental Wellbeing: Labor Market Conditions and Suicides in the United States (1979-2004)

Amin Mohseni-Cheraghlou
Journal of Socio-Economics, forthcoming

Abstract:
Applying a fixed-effects panel analysis to a 1979-2004 panel data of the U.S. states, this essay re-examines the link between labor markets and suicides in the United States. By disaggregating the analysis across genders and three different age groups (20-34, 35-64, and 65+) and analyzing several other labor market indicators besides overall unemployment rates, the essay finds that deteriorations in labor markets is associated with hikes in suicide rates of only men and women between 35 and 64 years of age. In other words, higher group-specific unemployment rates, larger deviations of unemployment rates from their group-specific trends, and larger variance in the overall unemployment rates are all associated with higher suicide rates of adults aged 35-64, or prime working-age adults. These findings suggest that the mental wellbeing of prime working-age adults is more dependent on labor market conditions than people in other age groups. Therefore, during period when prime working-age adults are facing unfavorable labor market conditions, U.S. suicide prevention programs must especially target this group of population.

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Does self-employment increase the economic well-being of low-skilled workers?

Magnus Lofstrom
Small Business Economics, May 2013, Pages 933-952

Abstract:
Low-skilled workers do not fare well in today's skill intensive economy and their opportunities continue to diminish. Utilizing data from the survey of income and program participation, this paper provides an analysis of the economic returns to business ownership among low-skilled workers and addresses the essential question of whether self-employment is a good option for low-skilled individuals that policymakers might consider encouraging. The analysis reveals substantial differences in the role of self-employment among low-skilled workers across gender and nativity - women and immigrants are shown to be of particular importance from both the perspectives of trends and policy relevance. We find that, although the returns to low-skilled self-employment among men is higher than among women, the analysis shows that wage/salary employment is a more financially rewarding option for most low-skilled workers.

By KEVIN LEWIS | 09:00:00 AM

Wednesday, June 5, 2013

Playing against type

"Seeing" Minorities and Perceptions of Disorder: Explicating the Mediating and Moderating Mechanisms of Social Cohesion

Rebecca Wickes et al.
Criminology, forthcoming

Abstract:
Research shows that residents report high levels of disorder in places with greater concentrations of minorities even after controlling for objective indicators of crime or disorder. Less understood, however, are the mechanisms that explain this relationship. Drawing on a survey of nearly 10,000 residents nested within 297 neighborhoods across two cities, we use a multiple indicators-multiple causes model to examine the cues that lead individuals to distort the presence of minorities in neighborhoods. We then employ multilevel models to test whether these distortions influence perceptions of disorder. Furthermore, we assess whether living in a socially cohesive neighborhood mediates and/or moderates the relationship between "seeing" minorities and perceiving disorder. We find that when residents overestimate the proportion of minorities living in their neighborhood, perceptions of disorder are heightened. Yet social cohesion moderates and partially mediates this relationship: Residents living in socially cohesive neighborhoods not only report less disorder than those living in less cohesive communities, but also they "see" fewer minorities when compared with residents living in less socially cohesive neighborhoods. These results suggest that social cohesion is an important mechanism for explaining how residents internalize the presence of minorities in their neighborhoods and how this then leads to perceived neighborhood disorder.

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"I Guess What He Said Wasn't That Bad": Dissonance in Nonconfronting Targets of Prejudice

Heather Rasinski, Andrew Geers & Alexander Czopp
Personality and Social Psychology Bulletin, forthcoming

Abstract:
Although confrontations can be an effective means of reducing prejudicial responding, individuals often do not confront others due to the interpersonal costs. In the present research, we examined the intrapersonal implications of not confronting prejudice. In three studies, female participants were exposed to a confederate who made a sexist remark. Consistent with self-justification theories, in Study 1, participants who valued confronting and were given the opportunity to confront - but did not - subsequently made more positive evaluations of the confederate. Study 2 found that when participants were given a chance to affirm an important aspect of the self prior to evaluating the confederate, these inflated evaluations of the confederate did not occur. Finally, in Study 3, participants who initially valued confronting but did not confront a sexist partner reduced the amount of importance they placed on confronting. These data reveal that there are important intrapersonal consequences of not confronting prejudice.

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Multiethnic Differences in Responses to Laboratory Pain Stimuli Among Children

Qian Lu, Lonnie Zeltzer & Jennie Tsao
Health Psychology, forthcoming

Objective: A growing body of literature suggests ethnic differences in experimental pain. However, these studies largely focus on adults and the comparison between Caucasians and African Americans. The primary aim of this study is to determine ethnic differences in laboratory-induced pain in a multiethnic child sample.

Method: Participants were 214 healthy children (mean age = 12.7, SD = 3.0 years). Ninety-eight Caucasian, 58 Hispanic, 34 African American, and 24 Asian children were exposed to four trials of pressure and radiant heat pain stimuli. Pain responses were assessed with self-report measures (i.e., pain intensity and unpleasantness) and behavioral observation (i.e., pain tolerance).

Results: Asians demonstrated more pain sensitivity than Caucasians, who evidenced more pain sensitivity than African Americans and Hispanics. The results hold even after controlling for age, sex, SES, and experimenter's ethnicity. Asians also showed higher anticipatory anxiety compared with other ethnic groups. Anticipatory anxiety accounted for some ethnic differences in pain between Asians, Hispanics, and African Americans.

Conclusions: By examining response to laboratory pain stimuli in children representing multiple ethnicities, an understudied sample, the study reveals unique findings compared to the existing literature. These findings have implications for clinicians who manage acute pain in children from diverse ethnic backgrounds. Future investigations should examine mechanisms that account for ethnic differences in pain during various developmental stages.

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"Every Shut Eye, Ain't Sleep": The Role of Racism-Related Vigilance in Racial/Ethnic Disparities in Sleep Difficulty

Margaret Hicken et al.
Race and Social Problems, June 2013, Pages 100-112

Abstract:
Although racial/ethnic disparities in health have been well characterized in biomedical, public health, and social science research, the determinants of these disparities are still not well understood. Chronic psychosocial stress related specifically to the American experience of institutional and interpersonal racial discrimination may be an important determinant of these disparities, as a growing literature in separate scientific disciplines documents the adverse health effects of stress and the greater levels of stress experienced by non-white compared to white Americans. However, the empirical literature on the importance of stress for health and health disparities specifically due to racial discrimination, using population-representative data, is still small and mixed. In this paper, we explore the association between a novel measure of racially salient chronic stress - "racism-related vigilance" - and sleep difficulty. We found that, compared to the white adults in our sample, black (but not Hispanic) adults reported greater levels of vigilance. This vigilance was positively associated with sleep difficulty to similar degrees for all racial/ethnic groups in our sample (white, black, Hispanic). Black adults reported greater levels of sleep difficulty compared to white adults. This disparity was slightly attenuated after adjustment for education and income. However, this disparity was completely attenuated after adjustment for racism-related vigilance. We found similar patterns of results for Hispanic compared to white adults, however, the disparities in sleep difficulty were smaller and not statistically significant. Because of the importance of sleep quality to health, our results suggest that the anticipation of and perseveration about racial discrimination is an important determinant of racial disparities in health.

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Racial Attitudes, Physician-Patient Talk Time Ratio, and Adherence in Racially Discordant Medical Interactions

Nao Hagiwara et al.
Social Science & Medicine, June 2013, Pages 123-131

Abstract:
Physician racial bias and patient perceived discrimination have each been found to influence perceptions of and feelings about racially discordant medical interactions. However, to our knowledge, no studies have examined how they may simultaneously influence the dynamics of these interactions. This study examined how (a) non-Black primary care physicians' explicit and implicit racial bias and (b) Black patients' perceived past discrimination affected physician-patient talk time ratio (i.e., the ratio of physician to patient talk time) during medical interactions and the relationship between this ratio and patients' subsequent adherence. We conducted a secondary analysis of self-report and video-recorded data from a prior study of clinical interactions between 112 low-income, Black patients and their 14 non-Black physicians at a primary care clinic in the Midwestern United States between June, 2006 and February, 2008. Overall, physicians talked more than patients; however, both physician bias and patient perceived past discrimination affected physician-patient talk time ratio. Non-Black physicians with higher levels of implicit, but not explicit, racial bias had larger physician-patient talk time ratios than did physicians with lower levels of implicit bias, indicating that physicians with more negative implicit racial attitudes talked more than physicians with less negative racial attitudes. Additionally, Black patients with higher levels of perceived discrimination had smaller physician-patient talk time ratios, indicating that patients with more negative racial attitudes talked more than patients with less negative racial attitudes. Finally, smaller physician-patient talk time ratios were associated with less patient subsequent adherence, indicating that patients who talked more during the racially discordant medical interactions were less likely to adhere subsequently. Theoretical and practical implications of these findings are discussed in the context of factors that affect the dynamics of racially discordant medical interactions.

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The Effect of Interracial Contact on Whites' Perceptions of Victimization Risk and Black Criminality

Daniel Mears et al.
Journal of Research in Crime and Delinquency, May 2013, Pages 272-299

Objectives: This article examines two questions. First, does interracial contact increase or decrease Whites' perceptions of Blacks' criminality? Second, does it affect Whites' perceived victimization risk, and, if so, is the effect mediated by the perceived criminality of Blacks as compared to the perceived criminality of different racial and ethnic groups?

Methods: Multivariate regression analyses of data from a national public opinion poll that included measures of perceived victimization risk and the criminality of Whites and Latinos.

Results: Interracial contact increases Whites' perceptions of the criminality of all racial and ethnic groups, not just Blacks. It also increases Whites' perceived risk of victimization, an effect that partially arises by increasing their perception of Whites and Latinos, and not just Blacks, as criminal.

Conclusions: Although the identified effects may be due to Whites' stereotypes about Blacks, they are equally consistent with the notion that interracial contact may educate Whites about crime. Unfortunately, the present study could not investigate this possibility. Future research ideally will address this limitation, use additional measures of contact, and assess other explanations for any identified effects.

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Whites' Perceptions of Discrimination against Blacks: The Influence of Common Identity

Jillian Banfield & John Dovidio
Journal of Experimental Social Psychology, forthcoming

Abstract:
The present research, consisting of three experiments, examined how different ways of representing the group identities of White and Black Americans affect Whites' recognition of discrimination against a Black person and their willingness to protest on behalf of that person. In Experiment 1 we predicted and found that inducing a common-group representation (as Americans), compared to a condition that emphasized separate racial-group identities, reduced Whites' recognition of subtle discrimination. This pattern was reversed under external threat. In Experiment 2, common identity reduced recognition of discrimination that was subtle, but not blatant. In addition, although a common-group identity did not facilitate Whites' willingness to protest blatant discrimination in Experiments 2 and 3, in Experiment 3 inducing a dual identity, which emphasizes both subgroup differences and a common-group representation, did. We discuss the implications of the results for when common- and dual-identity representations foster action on behalf of a minority group.

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Developmental Origins of the Other-Race Effect

Gizelle Anzures et al.
Current Directions in Psychological Science, June 2013, Pages 173-178

Abstract:
The other-race effect (ORE) in face recognition refers to better recognition memory for faces of one's own race than faces of another race-a common phenomenon among individuals living in primarily mono-racial societies. In this article, we review findings suggesting that early visual and sociocultural experiences shape one's processing of familiar and unfamiliar race classes and give rise to the ORE within the 1st year of life. However, despite its early development, the ORE can be prevented, attenuated, and even reversed given experience with a novel race class. Social implications of the ORE are discussed in relation to development of race-based preferences for social partners and racial prejudices.

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Communication in multiplayer gaming: Examining player responses to gender cues

Jeffrey Kuznekoff & Lindsey Rose
New Media & Society, June 2013, Pages 541-556

Abstract:
The goal of this study is to determine how gamers' reactions to male voices differ from reactions to female voices. The authors conducted an observational study with an experimental design to play in and record multiplayer matches (N = 245) of a video game. The researchers played against 1,660 unique gamers and broadcasted pre-recorded audio clips of either a man or a woman speaking. Gamers' reactions were digitally recorded, capturing what was said and heard during the game. Independent coders were used to conduct a quantitative content analysis of game data. Findings indicate that, on average, the female voice received three times as many negative comments as the male voice or no voice. In addition, the female voice received more queries and more messages from other gamers than the male voice or no voice.

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Putting yourself in the skin of a black avatar reduces implicit racial bias

Tabitha Peck et al.
Consciousness and Cognition, September 2013, Pages 779-787

Abstract:
Although it has been shown that immersive virtual reality (IVR) can be used to induce illusions of ownership over a virtual body (VB), information on whether this changes implicit interpersonal attitudes is meager. Here we demonstrate that embodiment of light-skinned participants in a dark-skinned VB significantly reduced implicit racial bias against dark-skinned people, in contrast to embodiment in light-skinned, purple-skinned or with no VB. 60 females participated in this between-groups experiment, with a VB substituting their own, with full-body visuomotor synchrony, reflected also in a virtual mirror. A racial Implicit Association Test (IAT) was administered at least three days prior to the experiment, and immediately after the IVR exposure. The change from pre- to post-experience IAT scores suggests that the dark-skinned embodied condition decreased implicit racial bias more than the other conditions. Thus, embodiment may change negative interpersonal attitudes and thus represent a powerful tool for exploring such fundamental psychological and societal phenomena.

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Experiencing ownership over a dark-skinned body reduces implicit racial bias

Lara Maister et al.
Cognition, August 2013, Pages 170-178

Abstract:
Previous studies have investigated how existing social attitudes towards other races affect the way we ‘share' their bodily experiences, for example in empathy for pain, and sensorimotor mapping. Here, we ask whether it is possible to alter implicit racial attitudes by experimentally increasing self-other bodily overlap. Employing a bodily illusion known as the ‘Rubber Hand Illusion', we delivered multisensory stimulation to light-skinned Caucasian participants to induce the feeling that a dark-skinned hand belonged to them. We then measured whether this could change their implicit racial biases against people with dark skin. Across two experiments, the more intense the participants' illusion of ownership over the dark-skinned rubber hand, the more positive their implicit racial attitudes became. Importantly, it was not the pattern of multisensory stimulation per se, but rather, it was the change in the subjective experience of body ownership that altered implicit attitudes. These findings suggest that inducing an overlap between the bodies of self and other through illusory ownership is an effective way to change and reduce negative implicit attitudes towards outgroups.

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Sleep and prejudice: A resource recovery approach

Sonia Ghumman & Christopher Barnes
Journal of Applied Social Psychology, forthcoming

Abstract:
Does sleepiness make one more likely to engage in stereotyping? Are people more likely to be prejudiced because of a poor night of sleep? Borrowing from ego depletion theory and research on self-control and prejudice, the present work investigates these questions. We suggest that sleep is a diminishable resource that fuels self-control and is, therefore, necessary for inhibiting prejudice. A series of 3 studies show that sleep did influence prejudice. Furthermore, we found that the relationship between sleep and prejudice was marginally moderated by negative implicit associations, such that this relationship primarily held true for individuals who have high negative implicit associations. These results highlight the critical role that sleep plays in suppressing prejudice.

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Status Boundary Enforcement and the Categorization of Black-White Biracials

Arnold Ho et al.
Journal of Experimental Social Psychology, forthcoming

Abstract:
Individuals who qualify equally for membership in more than one racial group are not judged as belonging equally to both of their parent groups, but instead are seen as belonging more to their lower status parent group. Why? The present paper begins to establish the role of individual differences and social context in hypodescent, the process of assigning multiracials the status of their relatively disadvantaged parent group. Specifically, in two experiments, we found that individual differences in social dominance orientation - a preference for group-based hierarchy and inequality - interacts with perceptions of socioeconomic threat to influence the use of hypodescent in categorizing half-Black, half-White biracial targets. Importantly, this paper begins to establish hypodescent as a "hierarchy-enhancing" social categorization.

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Feeling Understood as a Key to Cultural Differences in Life Satisfaction

Shigehiro Oishi et al.
Journal of Research in Personality, October 2013, Pages 488-491

Abstract:
We investigated the role of felt understanding in life satisfaction, using an event sampling method. As predicted, Asian students in the U.S. were less satisfied with their lives than Caucasian counterparts. Also as predicted, Asian students reported lower levels of felt understanding than did Caucasian students. Finally, felt understanding in everyday life accounted for the mean difference in life satisfaction between Asians and Caucasians. However, the Asian-Caucasian difference in life satisfaction and felt understanding could be due to general positivity or negativity. We thus statistically controlled for extraversion and neuroticism. Controlling for extraversion and neuroticism, felt understanding still mediated the Asian-Caucasian difference in life satisfaction.

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Ingroup Favoritism and Outgroup Derogation: Effects of News Valence, Character Race, and Recipient Race on Selective News Reading

Osei Appiah, Silvia Knobloch-Westerwick & Scott Alter
Journal of Communication, June 2013, Pages 517-534

Abstract:
This study examined whether the positive or negative valence of a news story, and the race of the character portrayed in the story, would influence Black or White readers' selection of a story. The study employed selective exposure methodology to unobtrusively measure story selections among Black and White readers as they browsed a news site. The results demonstrated Black newsreaders were more likely to select and read positive and negative stories featuring their racial ingroup, and more likely to select and read negative vis-à-vis positive stories about their outgroup. In contrast, Whites' story preference was not affected by story valence or character race. Theoretical assumptions from social identity, social comparison, and social cognitive theories are used to explain the findings.

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Attitude-Goal Correspondence and Interracial Interaction: Implications for Executive Function and Impression Formation

Adam Pearson et al.
Journal of Experimental Social Psychology, forthcoming

Abstract:
The present research examined whether mismatches in implicit racial attitudes and regulatory goals may contribute to well-documented cognitive depletion effects after interracial interactions. Consistent with a mismatch account of regulatory demands, both high and low implicitly-biased Whites showed evidence of cognitive depletion after interacting with a Black confederate, but as a function of oppositely-valenced emotion regulation prompts: Whereas high implicitly-biased Whites showed impaired subsequent performance on a Stroop task when instructed to suppress negative (but not positive) emotional expressions during an interracial interaction, low implicitly-biased Whites showed the opposite pattern. Additionally, attitude-regulatory goal mismatch was associated with more negative impressions of a Black confederate, independent of observers' impressions of the confederate. Implications of attitude-goal correspondence for intergroup interaction and the maintenance of intergroup bias are considered.

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When White Feels Right: The Effects of In-Group Affect and Race of Partner on Negotiation Performance

Debra Gilin Oore, Annette Gagnon & David Bourgeois
Negotiation and Conflict Management Research, May 2013, Pages 94-113

Abstract:
This research investigated the unique role of racial in-group affect, or liking one's racial group, to foster or inhibit integration in negotiations with different race partners. We hypothesized that when the racial backgrounds of the negotiators are salient, threat inherent in negotiations activates in-group affect for some White negotiators (those more "glad to be White"), triggering divergent negotiation approaches with White versus Black counterparts. In support of our hypotheses, we found that when negotiating with a Black confederate, stronger in-group affect of White participants was a liability, relating to poorer joint outcomes and a "chilling and competing" negotiation approach. When negotiating with a White confederate, stronger in-group affect of White participants instead boosted the dyad's joint outcomes by fostering greater trust. The meaning and practical implications of strong in-group affect in negotiations with diverse counterparts are discussed.

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Association Between Perceived Discrimination and Racial/Ethnic Disparities in Problem Behaviors Among Preadolescent Youths

Laura Bogart et al.
American Journal of Public Health, June 2013, Pages 1074-1081

Objectives: We examined the contribution of perceived racial/ethnic discrimination to disparities in problem behaviors among preadolescent Black, Latino, and White youths.

Methods: We used cross-sectional data from Healthy Passages, a 3-community study of 5119 fifth graders and their parents from August 2004 through September 2006 in Birmingham, Alabama; Los Angeles County, California; and Houston, Texas. We used multivariate regressions to examine the relationships of perceived racial/ethnic discrimination and race/ethnicity to problem behaviors. We used values from these regressions to calculate the percentage of disparities in problem behaviors associated with the discrimination effect.

Results: In multivariate models, perceived discrimination was associated with greater problem behaviors among Black and Latino youths. Compared with Whites, Blacks were significantly more likely to report problem behaviors, whereas Latinos were significantly less likely (a "reverse disparity"). When we set Blacks' and Latinos' discrimination experiences to zero, the adjusted disparity between Blacks and Whites was reduced by an estimated one third to two thirds; the reverse adjusted disparity favoring Latinos widened by about one fifth to one half.

Conclusions: Eliminating discrimination could considerably reduce mental health issues, including problem behaviors, among Black and Latino youths.

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Investigating prejudice toward men perceived to be Muslim: Cues of foreignness versus phenotype

Lisa Brown et al.
Journal of Applied Social Psychology, forthcoming

Abstract:
Possible factors in prejudice toward Muslims and those perceived to be Muslims were investigated. We specifically investigated cues of foreignness that may communicate threat. Using a 2 (Complexion: dark vs. light) × 2 (Dress: Middle Eastern vs. Western) × 2 (Name: Allen vs. Mohammed) between-subjects design, we expected cues of foreignness (dress and name) to have a greater impact on perceptions of targets than phenotype (complexion). Participants reviewed portraits of young men varying in the manipulated characteristics and gave their impressions. Generally, complexion did not affect perceptions, but portraits in Middle Eastern dress were rated less positively. There was a name by dress interaction in which Allen in Western dress was rated least negatively. Implications for future research are discussed.

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Toward a Dose-Response Account of Media Priming

Florian Arendt
Communication Research, forthcoming

Abstract:
We present a dose-response (DR) account of media priming. DR concepts describe the relationship between a dose and the elicited response and, thus, allow us to study dose-dependent media priming effects. We report empirical evidence from an experiment (N = 351) for the DR relationship between exposure to stereotypic newspaper content and readers' stereotypic social reality estimates. We investigated the change in the media priming effect size by utilizing nine experimentally manipulated dose-conditions (i.e., frequency of the media prime). The empirical data appeared in the form of a Gaussian distribution function: We were able to document (1) a threshold dose, which generally allows us to specify the acceptable daily intake of potentially harmful media content. Furthermore, (2) we found a decline in the effect size at very high dose levels. We argue that a DR account as a supplement to contemporary approaches can be beneficial for media priming research.

By KEVIN LEWIS | 09:00:00 AM

Tuesday, June 4, 2013

Capitalized

Company name fluency, investor recognition, and firm value

Clifton Green & Russell Jame
Journal of Financial Economics, forthcoming

Abstract:
Research from psychology suggests that people evaluate fluent stimuli more favorably than similar information that is harder to process. Consistent with fluency affecting investment decisions, we find that companies with short, easy to pronounce names have higher breadth of ownership, greater share turnover, lower transaction price impacts, and higher valuation ratios. Corporate name changes increase fluency on average, and fluency-improving name changes are associated with increases in breadth of ownership, liquidity, and firm value. Name fluency also affects other investment decisions, with fluently named closed-end funds trading at smaller discounts and fluent mutual funds attracting greater fund flows.

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Informed Trading through the Accounts of Children

Henk Berkman, Paul Koch & Joakim Westerholm
Journal of Finance, forthcoming

Abstract:
This study shows that the guardians behind underaged accounts are successful at picking stocks. Moreover, they tend to channel their best trades through the accounts of children, especially when they trade just before major earnings announcements, large price changes, and takeover announcements. Building on these results, we argue that the proportion of total trading activity through underaged accounts (labeled BABYPIN) should serve as an effective proxy for the probability of information trading in a stock. Consistent with this claim, we show that investors demand a higher return for holding stocks with a greater likelihood of private information, proxied by BABYPIN.

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Can Financial Engineering Cure Cancer?

David Fagnan et al.
American Economic Review, May 2013, Pages 406-411

Abstract:
Traditional financing sources such as private and public equity may not be ideal for investment projects with low probabilities of success, long time horizons, and large capital requirements. Nevertheless, such projects, if not too highly correlated, may yield attractive risk-adjusted returns when combined into a single portfolio. Such "megafund" portfolios may be too large to finance through private or public equity alone. But with sufficient diversification and risk analytics, debt financing via securitization may be feasible. Credit enhancements (i.e., derivatives and government guarantees) can also improve megafund economics. We present an analytical framework and illustrative empirical examples involving cancer research.

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How Safe are Money Market Funds?

Marcin Kacperczyk & Philipp Schnabl
Quarterly Journal of Economics, forthcoming

Abstract:
We examine the risk-taking behavior of money market funds during the financial crisis of 2007-2010. We find that: (1) money market funds experienced an unprecedented expansion in their risk-taking opportunities; (2) funds had strong incentives to take on risk because fund inflows were highly responsive to fund yields; (3) funds sponsored by financial intermediaries with more money fund business took on more risk; (4) funds suffered runs as a result of their risk taking. This evidence suggests that money market funds lack safety because they have strong incentives to take on risk when the opportunity arises and are vulnerable to runs.

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Playing Favorites: How Firms Prevent the Revelation of Bad News

Lauren Cohen, Dong Lou & Christopher Malloy
Harvard Working Paper, March 2013

Abstract:
We explore a subtle but important mechanism through which firms manipulate their information environments. We show that firms control information flow to the market through their specific organization and choreographing of earnings conference calls. Firms that "cast" their conference calls by disproportionately calling on bullish analysts tend to underperform in the future. A long-short portfolio that exploits this differential firm behavior earns abnormal returns of up to 95 basis points per month. Firms that call on more favorable analysts experience more negative future earnings surprises and more future earnings restatements. Further, firms that cast their calls have higher accruals, barely exceed/meet earnings forecasts, and subsequently issue equity.

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Before and After: The Impact of a Real Bubble Crash on Investors' Trading Behavior in the Lab

Binglin Gong, Vivian Lei & Pan Deng
Journal of Economic Behavior & Organization, forthcoming

Abstract:
We report the results of an experiment designed to study whether or not having experienced booms and crashes in naturally occurring asset markets affects subjects' trading behavior in the lab. Active investors in the Shanghai Stock Exchange were recruited to participate in either the Boom treatment, conducted in June 2007 after the Shanghai Stock Exchange had had a bull market for almost two years, or the Crash treatment, conducted in August 2008 after the SSE Composite Index had plummeted almost 60 percent from its high reached in October 2007. We find that, compared to those in the Crash treatment, subjects in the Boom treatment were much more active when participating in our experimental asset markets in that they tended to made bigger trades and preferred to hold more shares than cash. These behavioral differences cannot be explained by the overconfidence hypothesis.

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Sentiment during Recessions

Diego Garcia
Journal of Finance, June 2013, Pages 1267-1300

Abstract:
This paper studies the effect of sentiment on asset prices during the 20th century (1905 to 2005). As a proxy for sentiment, we use the fraction of positive and negative words in two columns of financial news from the New York Times. The main contribution of the paper is to show that, controlling for other well-known time-series patterns, the predictability of stock returns using news' content is concentrated in recessions. A one standard deviation shock to our news measure during recessions predicts a change in the conditional average return on the DJIA of 12 basis points over one day.

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Externalities of Public Firm Presence: Evidence from Private Firms' Investment Decisions

Brad Badertscher, Nemit Shroff & Hal White
Journal of Financial Economics, forthcoming

Abstract:
Public firms provide a large amount of information through their disclosures. In addition, information intermediaries publicly analyze, discuss, and disseminate these disclosures. Thus, greater public firm presence in an industry should reduce uncertainty in that industry. Following the theoretical prediction of investment under uncertainty, we hypothesize and find that private firms are more responsive to their investment opportunities when they operate in industries with greater public firm presence. Further, we find that the effect of public firm presence is greater in industries with better information quality and in industries characterized by a greater degree of investment irreversibility. Our results suggest that public firms generate positive externalities by reducing industry uncertainty and facilitating more efficient private firm investment.

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Is Gold the Best Hedge and a Safe Haven under changing Stock Market Volatility?

Matthew Hood & Farooq Malik
Review of Financial Economics, April 2013, Pages 47-52

Abstract:
We evaluate the role of gold and other precious metals relative to volatility (VIX) as a hedge (negatively correlated with stocks) and safe haven (negatively correlated with stocks in extreme stock market declines) using data from the US stock market. Using daily data from November 1995 to November 2010, we find that gold, unlike other precious metals, serves as a hedge and a weak safe haven for US stock market. However, we find that VIX serves as a very strong hedge and a strong safe haven during our sample period. We also find that in periods of extremely low or high volatility, gold does not have a negative correlation with the US stock market. Our results show that VIX is a superior hedging tool and serves as a better safe haven than gold during our sample period. We highlight the practical significance of our results for financial market participants by conducting a portfolio analysis.

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Do Hedge Funds Manipulate Stock Prices?

Itzhak Ben-David et al.
Journal of Finance, forthcoming

Abstract:
We provide evidence suggesting that some hedge funds manipulate stock prices on critical reporting dates. Stocks in the top quartile of hedge fund holdings exhibit abnormal returns of 0.30% on the last day of the quarter and a reversal of 0.25% on the following day. A significant part of the return is earned during the last minutes of trading. Analysis of intraday volume and order imbalance provides further evidence consistent with manipulation. These patterns are stronger for funds that have higher incentives to improve their ranking relative to their peers.

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Greed and Fear in Financial Markets: The Case of Stock Spam E-Mails

Bill Hu & Thomas McInish
Journal of Behavioral Finance, Spring 2013, Pages 83-93

Abstract:
Using a rich dataset of stock spam e-mails as a laboratory, we test and find support for three behavioral finance theories related to investor attention, ambiguity, and overweighting of low probability outcomes. First, we find that both the dollar volume and return on the peak day of the spam campaigns (SCs) are significantly higher compared to those on randomly selected non-spam dates. In addition, SCs reduce the number of zero trading days while the campaign is underway. Second, e-mails with a target price have significantly higher abnormal dollar volume and abnormal return on the peak day of the SC than e-mails without a target price. Thus, individual investors favor bets with unambiguous payoffs, which supports the ambiguity hypothesis. Finally, when the target price indicated in spam e-mails is about 53 times the current price, the abnormal return of the SC peaked at 31%. We document a nonlinear relationship between abnormal return on the peak day of the SCs and the premium implied in the spam e-mails. Although investors overweight low probability events, the overweighting decreases when the probability becomes out of reach. Our findings concerning target price are consistent with cumulative prospect theory.

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Not all financial speculation is treated equally: Laypeople's moral judgments about speculative short selling

Sebastian Lotz & Andrea Fix
Journal of Economic Psychology, forthcoming

Abstract:
Since the recent financial crisis, regulators and the general public have focused on financial speculation as one of its potential causes. In addition to the roles played by rating agencies and complicated financial engineering, speculative short sales have been put into question. However, laypeople's moral judgments about this type of financial speculation have rarely been investigated in economic psychology. The present study aims to fill this gap. Across four studies, we find that laypeople's moral judgments of short selling are significantly harsher than their judgments of long positions. Both successful (Study 1) and unsuccessful (Study 2) short selling receives harsher moral judgments. In addition, studies which manipulate the moral character of the shorted asset (Study 3) or the time horizon of the investment strategy (Study 4) support the conclusion that short selling is considered less moral than taking a similar long position. The results present consistent support for a judgment bias of economic laypeople in the domain of financial economics.

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Structural Shifts in Credit Rating Standards

Aysun Alp
Journal of Finance, forthcoming

Abstract:
I examine the time-series variation in corporate credit rating standards from 1985 to 2007. A divergent pattern exists between investment-grade and speculative-grade rating standards from 1985 to 2002 as investment-grade standards tighten and speculative-grade loosen. In 2002, a structural shift occurs towards more stringent ratings. Holding characteristics constant, firms experience a drop of 1.5 notches in ratings due to tightened standards from 2002 to 2007. Credit spread tests suggest that the variation in standards is not completely due to changes in the economic climate. Rating standards affect credit spreads. Loose ratings are associated with higher default rates.

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Information dissipation as an early-warning signal for the Lehman Brothers collapse in financial time series

Rick Quax, Drona Kandhai & Peter Sloot
Scientific Reports, May 2013

Abstract:
In financial markets, participants locally optimize their profit which can result in a globally unstable state leading to a catastrophic change. The largest crash in the past decades is the bankruptcy of Lehman Brothers which was followed by a trust-based crisis between banks due to high-risk trading in complex products. We introduce information dissipation length (IDL) as a leading indicator of global instability of dynamical systems based on the transmission of Shannon information, and apply it to the time series of USD and EUR interest rate swaps (IRS). We find in both markets that the IDL steadily increases toward the bankruptcy, then peaks at the time of bankruptcy, and decreases afterwards. Previously introduced indicators such as ‘critical slowing down' do not provide a clear leading indicator. Our results suggest that the IDL may be used as an early-warning signal for critical transitions even in the absence of a predictive model.

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No conflict, no interest: On the economics of conflicts of interest faced by analysts

William Forbes
European Journal of Law and Economics, June 2013, Pages 327-348

Abstract:
This paper outlines evolution of the policy response to conflicts of interest analysts face in offering investment advice to investors when the company they follow may also buy merchant banking services from their employer. Both in the US and the UK on a both statutory and common law basis the response has been one of to disclose and let market participants price the implied conflict or simply rebut the advice given. An efficient market can price conflicts and by implication unravel any potential damage to shareholder wealth induced by analysts' conflicts of interests in this view. I consider the impact the presence of "noise traders" in financial markets may have on the welfare implications of this sort of policy stance. The presence of noise traders casts doubt on the benign impact of conflicts of interest in financial markets. In particular the presence of noise induced variance in analyst's forecasts implies disclosure based remedies may be ineffective in mitigating the harm of analyst's conflicts of interest.

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The Real Effects of Financial Shocks: Evidence from Exogenous Changes in Analyst Coverage

François Derrien & Ambrus Kecskés
Journal of Finance, forthcoming

Abstract:
We study the causal effects of analyst coverage on corporate investment and financing policies. We hypothesize that a decrease in analyst coverage increases information asymmetry and thus increases the cost of capital; as a result, firms decrease their investment and financing. We use broker closures and broker mergers to identify changes in analyst coverage that are exogenous to corporate policies. Using a difference-in-differences approach, we find that firms that lose an analyst decrease their investment and financing by 1.9% and 2.0% of total assets, respectively, compared to similar firms that do not lose an analyst.

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Shaping Liquidity: On the Causal Effects of Voluntary Disclosure

Karthik Balakrishnan et al.
NBER Working Paper, April 2013

Abstract:
Can managers influence the liquidity of their firms' shares? We use plausibly exogenous variation in the supply of public information to show that firms seek to actively shape their information environments by voluntarily disclosing more information than is mandated by market regulations and that such efforts have a sizeable and beneficial effect on liquidity. Firms respond to an exogenous loss of public information by providing more timely and informative earnings guidance. Responses appear motivated by a desire to reduce information asymmetries between retail and institutional investors. Liquidity improves as a result of voluntary disclosure and in turn increases firm value. This suggests that managers can causally influence their cost of capital via voluntary disclosure.

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Libertarian Paternalism, Information Production, and Financial Decision Making

Bruce Ian Carlin, Simon Gervais & Gustavo Manso
Review of Financial Studies, forthcoming

Abstract:
We develop a theoretical model to analyze the effects of libertarian paternalism on information production and financial decision making. Individuals in our model appreciate the information content of the recommendations made by a social planner. This affects their incentive to gather information, and in turn the speed at which information spreads across market participants, via social learning or formal advice channels. We characterize situations in which libertarian paternalism improves welfare and contrast them with scenarios in which this policy is suboptimal because of its negative impact on the production and propagation of information.

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The Effects of Stock Lending on Security Prices: An Experiment

Steven Kaplan, Tobias Moskowitz & Berk Sensoy
Journal of Finance, forthcoming

Abstract:
We examine the impact of short selling by conducting a randomized stock lending experiment. Working with a large, anonymous money manager, we create an exogenous and sizeable shock to the supply of lendable shares by taking high-loan fee stocks in the manager's portfolio and randomly making available and withholding stocks from the lending market. The experiment ran in two independent phases: the first, from September 5 to 18, 2008, with over $580 million of securities lent; and the second, from June 5 to September 30, 2009, with over $250 million of securities lent. While the supply shocks significantly reduce market lending fees and raise quantities, we find no evidence that returns, volatility, skewness, or bid-ask spreads are affected. The results provide novel evidence on the impact of shorting supply and do not indicate any adverse effects on stock prices from securities lending.

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Evolutionary Thinking in Microeconomic Models: Prestige Bias and Market Bubbles

Adrian Viliami Bell
PLoS ONE, March 2013

Abstract:
Evolutionary models broadly support a number of social learning strategies likely important in economic behavior. Using a simple model of price dynamics, I show how prestige bias, or copying of famed (and likely successful) individuals, influences price equilibria and investor disposition in a way that exacerbates or creates market bubbles. I discuss how integrating the social learning and demographic forces important in cultural evolution with economic models provides a fruitful line of inquiry into real-world behavior.

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Diamonds - A precious new asset?

Benjamin Auer & Frank Schuhmacher
International Review of Financial Analysis, June 2013, Pages 182-189

Abstract:
During the recent turbulences in the world's financial markets, diamond companies have started advertising diamonds as a new asset that can hedge against market volatility and be a valuable portfolio component. To put this claim to the test, this article investigates (i) the performance of investments in diamonds of different quality grades, (ii) time-varying correlations between the returns on diamonds and traditional asset classes and (iii) the role of diamonds as a potential diversifier in a world market portfolio. Our results, based on monthly PolishedPrices diamond index data for the years 2002 to 2012, show that in this crisis-ridden period, an investment in a diversified diamond portfolio has outperformed a diversified stock market investment. Additionally, evidence on low time-varying correlations to traditional asset classes highlights that diamonds offer some diversification potential. However, further analysis shows that diamonds can only generate economically significant value in a world market portfolio (by either reducing risk or increasing mean return) when rather high diamond proportions are included in the portfolio.

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Price Movements and the Prevalence of Informed Traders: The Case of Line Movement in College Basketball

Kevin Krieger & Andy Fodor
Journal of Economics and Business, July-August 2013, Pages 70-82

Abstract:
Recent research has hypothesized that a higher concentration of informed traders in a market implies that prices are more efficient. A reasonable next question is whether large price movements in markets with a relatively more informed clientele are more indicative of information realization. We find line movements in college basketball games of relatively low profile, denoted by the lack of a "power conference" team in the contest, are significantly more likely to be the result of information realization. This confirms that substantial price changes in markets with fewer ordinary traders are more (less) likely indicative of information flow (noise).

By KEVIN LEWIS | 09:00:00 AM

Monday, June 3, 2013

By-product

Political ideology affects energy-efficiency attitudes and choices

Dena Gromet, Howard Kunreuther & Richard Larrick
Proceedings of the National Academy of Sciences, forthcoming

Abstract:
This research demonstrates how promoting the environment can negatively affect adoption of energy efficiency in the United States because of the political polarization surrounding environmental issues. Study 1 demonstrated that more politically conservative individuals were less in favor of investment in energy-efficient technology than were those who were more politically liberal. This finding was driven primarily by the lessened psychological value that more conservative individuals placed on reducing carbon emissions. Study 2 showed that this difference has consequences: In a real-choice context, more conservative individuals were less likely to purchase a more expensive energy-efficient light bulb when it was labeled with an environmental message than when it was unlabeled. These results highlight the importance of taking into account psychological value-based considerations in the individual adoption of energy-efficient technology in the United States and beyond.

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Campaign Promises, Democratic Governance, and Environmental Policy in the U.S. Congress

Evan Ringquist, Milena Neshkova & Joseph Aamidor
Policy Studies Journal, May 2013, Pages 365-387

Abstract:
One important criterion for assessing the quality of democratic governance is the extent to which the policy process effectively translates citizen preferences into collective choices. Several scholars have observed a discrepancy between citizen preferences for strong environmental protection and weak policies adopted in the United States, indicating that the United States may fall short on this criterion. We examine one possible mechanism contributing to this discrepancy - legislator defection from campaign promises. Our data indicate that legislators in the U.S. Congress routinely defect from their campaign promises in environmental protection, undermining the link between citizen preferences and policy choice. We also find that legislators are much more likely to defect from pro-environmental campaign promises, which moves government policy toward less stringent environmental programs. Finally, the propensity of legislators to defect from their campaign promises is systematic, with defection affected by partisanship, constituency influence, the influence of the majority party, and the likely consequences of defection for policy choice. These findings contribute empirical evidence relevant to the "mandate theory" perspective on how citizen preferences are translated into collective choices through the policy process. These findings may also complement research in comparative politics concluding that legislatures selected through single member districts adopt less stringent environmental policies than do legislatures chosen via proportional representation in that the mechanism for this effect may go through legislator defection from campaign promises.

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Do economic conditions influence environmental policy? Evidence from the U.S. Senate

Grant Jacobsen
Economics Letters, August 2013, Pages 167-170

Abstract:
This paper investigates whether economic conditions influence environmental policy by examining how policymakers voting on environmental legislation respond to changes in their state's unemployment rate. The outcome of interest is a U.S. Senator's League of Conservation Voters score, which reflects how often a senator voted for the environmentally-favorable outcome on bills related to the environment in a given year. I find evidence that a higher unemployment rate is associated with reduced support for environmentally-favorable policies, and that the estimated response is largest for Republicans. Counterfactual estimates indicate that if each state had experienced its lowest observed unemployment rate throughout the sample, then the proportion of votes taking the environmentally-favorable outcome would have increased from 36% to 41%.

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Getting Liberals and Conservatives to Go Green: Political Ideology and Congruent Appeals

Blair Kidwell, Adam Farmer & David Hardesty
Journal of Consumer Research, forthcoming

Abstract:
The authors develop a conceptual model of how the congruence of political ideology and persuasive appeals enhances sustainable behaviors. In study 1, persuasive appeals consistent with individualizing and binding moral foundations were developed to enhance liberal and conservative recycling. In study 2, individualizing and binding appeals were tested on actual recycling behavior using a longitudinal field study to demonstrate the effectiveness of messages congruent with the moral foundations of liberals and conservatives. Study 3 demonstrated that enhanced fluency represents the underlying psychological process that mediates the relationship between message congruence and intentions. Moreover, study 3 established that spillover effects resulting from increased intentions to engage in sustainable disposition behavior enhances intentions to engage in sustainable acquisition and consumption behaviors. Finally, study 4 ruled out potential message confounds to demonstrate the robustness of the findings. Practical implications for marketers and public policy officials interested in increasing sustainable behaviors are offered.

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How Pro-Poor Growth Affects the Demand for Energy

Paul Gertler et al.
NBER Working Paper, May 2013

Abstract:
Most of the future growth in energy use is forecast to come from the developing world. Understanding the likely pace and specific location of this growth is essential to inform decisions about energy infrastructure investments and to improve greenhouse gas emissions forecasts. We argue that countries with pro-poor economic growth will experience larger increases in energy demand than countries where growth is more regressive. When poor households' incomes go up, their energy demand increases along the extensive margin as they buy energy-using assets for the first time. We also argue that the speed at which households come out of poverty affects their asset purchase decisions. We provide empirical support for these hypotheses by examining the causal impact of increases in household income on asset accumulation and energy use in the context of Mexico's conditional cash transfer program. We find that transfers had a large effect on asset accumulation among the low-income program beneficiaries, and the effect is greater when the cash is transferred over a shorter time period. We apply lessons from the household analysis to aggregate energy forecast models using country-level panel data. Our results suggest that existing forecasts could grossly underestimate future energy use in the developing world.

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Traffic-Related Air Pollution Exposure in the First Year of Life and Behavioral Scores at Seven Years of Age

Nicholas Newman et al.
Environmental Health Perspectives, June 2013, Pages 731-736

Background: There is increasing concern about the potential effects of traffic-related air pollution (TRAP) on the developing brain. The impact of TRAP exposure on childhood behavior is not fully understood due to limited epidemiologic studies.

Objective: To explore the association between early life exposure to TRAP using the surrogate, elemental carbon attributed to traffic (ECAT), and attention deficit/hyperactivity disorder (ADHD) symptoms at age seven.

Methods: Exposure to ECAT during infancy and behavioral scores at age seven were collected utilizing the Cincinnati Childhood Allergy and Air Pollution (CCAAPS) birth cohort. Children enrolled in CCAAPS had at least one atopic parent and a birth residence either < 400m or > 1500m from a major highway. Children were followed from infancy through age seven. ECAT exposure during the first year of life was estimated based on measurements from 27 air sampling sites and land use regression modeling. Parents completed the Behavioral Assessment System for Children 2nd Edition, at age seven. ADHD and related symptoms were assessed using the Hyperactivity, Inattention, Aggression, Conduct Problems, and Atypicality subscales.

Results: Exposure to the highest tertile of ECAT during the child's first year of life was significantly associated with hyperactivity T scores in the "at risk" range at age seven after adjustment (aOR=1.7; 95% CI: 1.0, 2.7). Stratification by maternal education revealed a stronger association in children whose mothers had higher education (aOR=2.3; 95% CI: 1.3, 4.1).

Conclusions: ECAT exposure during infancy was associated with higher hyperactivity scores in children; this association was limited to children whose mothers had more than a high school education.

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Residential proximity to major roadways and renal function

Shih-Ho Lue et al.
Journal of Epidemiology & Community Health, forthcoming

Background: Living near major roadways has been associated with increased risk of cardiovascular events, but little is known about its impact on renal function.

Methods: We calculated the estimated glomerular filtration rate (eGFR) for 1103 consecutive Boston-area patients hospitalised with confirmed acute ischaemic stroke between 1999 and 2004. We used linear regression to evaluate the association between eGFR and categories of residential distance to major roadway (0 to ≤50, >50 to ≤100, >100 to ≤200, >200 to ≤400, >400 to ≤1000 and >1000 m) adjusting for age, sex, race, smoking, comorbid conditions, treatment with ACE inhibitor and neighbourhood-level socioeconomic characteristics. In a second analysis, we considered the log of distance to major roadway as a continuous variable.

Results: Patients living closer to a major roadway had lower eGFR than patients living farther away (Ptrend=0.01). Comparing patients living 50 m versus 1000 m from a major roadway was associated with a 3.9 ml/min/1.73 m2 lower eGFR (95% CI 1.0 to 6.7; p=0.007): a difference comparable in magnitude to the reduction in eGFR observed for a 4-year increase in age in population-based studies. The magnitude of this association did not differ significantly across categories of age, sex, race, history of hypertension, diabetes or socioeconomic status.

Conclusions: Living near a major roadway is associated with lower eGFR in a cohort of patients presenting with acute ischaemic stroke. If causal, these results imply that exposures associated with living near a major roadway contribute to reduced renal function, an important risk factor for cardiovascular events.

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Vehicle Scrappage and Gasoline Policy

Mark Jacobsen & Arthur van Benthem
NBER Working Paper, May 2013

Abstract:
We estimate the sensitivity of scrap decisions to changes in used car values - the "scrap elasticity" - and show how it influences used car fleets under policies aimed at reducing gasoline use. Large scrap elasticities will tend to produce emissions leakage under efficiency standards as the longevity of used vehicles is increased, a process known as the Gruenspecht effect. To explore the magnitude of this leakage we assemble a novel dataset of U.S. used vehicle registrations and prices, which we relate through time via differential effects in gasoline cost: A gasoline price increase or decrease of $1 alters the number of fuel-efficient vs. fuel-inefficient vehicles scrapped by 18%. These relationships allow us to provide what we believe are the first estimates of the scrap elasticity itself, which we find to be about -0.7. When applied in a model of fuel economy standards, the elasticities we estimate suggest that 13-23% of the expected fuel savings will leak away through the used vehicle market. This considerably reduces the cost-effectiveness of the standard, rivaling or exceeding the importance of the often-cited mileage "rebound" effect.

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Geochemical and isotopic variations in shallow groundwater in areas of the Fayetteville shale development, north-central Arkansas

Nathaniel Warner et al.
Applied Geochemistry, forthcoming

Abstract:
Exploration of unconventional natural gas reservoirs such as impermeable shale basins through the use of horizontal drilling and hydraulic fracturing has changed the energy landscape in the U.S.A. providing a vast new energy source. The accelerated production of natural gas has triggered a debate concerning the safety and possible environmental impacts of these operations. This study investigates one of the critical aspects of the environmental effects; the possible degradation of water quality in shallow aquifers overlying producing shale formations. The geochemistry of domestic groundwater wells was investigated in aquifers overlying the Fayetteville Shale in north-central Arkansas, where approximately 4,000 wells have been drilled since 2004 to extract unconventional natural gas. Monitoring was performed on 127 drinking water wells and the geochemistry of major ions, trace metals, CH4 gas content and its C isotopes (δ13CCH4), and select isotope tracers (δ11B, 87Sr/86Sr, δ2H, δ18O, δ13CDIC) compared to the composition of flowback-water samples directly from Fayetteville Shale gas wells. Dissolved CH4 was detected in 63% of the drinking-water wells (32 of 51 samples), but only six wells exceeded concentrations of 0.5 mg CH4/L. The δ13CCH4 of dissolved CH4 ranged from -42.3‰ to -74.7‰, with the most negative values characteristic of a biogenic source also associated with the highest observed CH4 concentrations, with a possible minor contribution of trace amounts of thermogenic CH4. The majority of these values are distinct from the reported thermogenic composition of the Fayetteville Shale gas (δ13CCH4=-35.4‰ to -41.9‰). Based on major element chemistry, four shallow groundwater types were identified: (1) low (<100 mg/L) total dissolved solids (TDS), (2) TDS>100mg/L and Ca-HCO3 dominated, (3) TDS> 100mg/L and Na-HCO3 dominated, and (4) slightly saline groundwater with TDS> 100mg/L and Cl >20 mg/L with elevated Br/Cl ratios (>0.001). The Sr (87Sr/86Sr = 0.7097 to 0.7166), C (δ13CDIC = -21.3 to -4.7‰), and B (δ11B= 3.9 to 32.9‰) isotopes clearly reflect water-rock interactions within the aquifer rocks, while the stable O and H isotopic composition mimics the local meteoric water composition. Overall, there was a geochemical gradient from low-mineralized recharge water to more evolved Ca-HCO3, and higher-mineralized Na-HCO3 composition generated by a combination of carbonate dissolution, silicate weathering, and reverse base-exchange reactions. The chemical and isotopic compositions of the bulk shallow groundwater samples were distinct from the Na-Cl type Fayetteville flowback/produced waters (TDS ∼10,000-20,000 mg/L). Yet, the high Br/Cl variations in a small subset of saline shallow groundwater suggest that they were derived from dilution of saline water similar to the brine in the Fayetteville Shale. Nonetheless, no spatial relationship was found between CH4 and salinity occurrences in shallow drinking water wells with proximity to shale-gas drilling sites. The integration of multiple geochemical and isotopic proxies shows no direct evidence of contamination in shallow drinking-water aquifers associated with natural gas extraction from the Fayetteville Shale.

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The Role of Inventories and Speculative Trading in the Global Market for Crude Oil

Lutz Kilian & Daniel Murphy
Journal of Applied Econometrics, forthcoming

Abstract:
We develop a structural model of the global market for crude oil that for the first time explicitly allows for shocks to the speculative demand for oil as well as shocks to flow demand and flow supply. The speculative component of the real price of oil is identified with the help of data on oil inventories. Our estimates rule out explanations of the 2003-2008 oil price surge based on unexpectedly diminishing oil supplies and based on speculative trading. Instead, this surge was caused by unexpected increases in world oil consumption driven by the global business cycle. There is evidence, however, that speculative demand shifts played an important role during earlier oil price shock episodes including 1979, 1986 and 1990. Our analysis implies that additional regulation of oil markets would not have prevented the 2003-2008 oil price surge. We also show that, even after accounting for the role of inventories in smoothing oil consumption, our estimate of the short-run price elasticity of oil demand is much higher than traditional estimates from dynamic models that do not account for for the endogeneity of the price of oil.

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The Simple Economics of Commodity Price Speculation

Christopher Knittel & Robert Pindyck
NBER Working Paper, April 2013

Abstract:
The price of crude oil in the U.S. never exceeded $40 per barrel until mid-2004. By 2006 it reached $70, and in July 2008 it peaked at $145. By late 2008 it had plummeted to about $30 before increasing to $110 in 2011. Are speculators at least partly to blame for these sharp price changes? We clarify the effects of speculators on commodity prices. We focus on crude oil, but our approach can be applied to other commodities. We explain the meaning of "oil price speculation," how it can occur, and how it relates to investments in oil reserves, inventories, or derivatives (such as futures contracts). Turning to the data, we calculate counterfactual prices that would have occurred from 1999 to 2012 in the absence of speculation. Our framework is based on a simple and transparent model of supply and demand in the cash and storage markets for a commodity. It lets us determine whether speculation is consistent with data on production, consumption, inventory changes, and convenience yields given reasonable elasticity assumptions. We show speculation had little, if any, effect on prices and volatility.

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Limits to arbitrage and hedging: Evidence from commodity markets

Viral Acharya, Lars Lochstoer & Tarun Ramadorai
Journal of Financial Economics, forthcoming

Abstract:
We build an equilibrium model of commodity markets in which speculators are capital constrained, and commodity producers have hedging demands for commodity futures. Increases in producers' hedging demand or speculators' capital constraints increase hedging costs via price-pressure on futures. These in turn affect producers' equilibrium hedging and supply decision inducing a link between a financial friction in the futures market and the commodity spot prices. Consistent with the model, measures of producers' propensity to hedge forecasts futures returns and spot prices in oil and gas market data from 1979-2010. The component of the commodity futures risk premium associated with producer hedging demand rises when speculative activity reduces. We conclude that limits to financial arbitrage generate limits to hedging by producers, and affect equilibrium commodity supply and prices.

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Can Household Consumers Save the Wild Fish? Lessons from a Sustainable Seafood Advisory

Eric Hallstein & Sofia Villas-Boas
Journal of Environmental Economics and Management, forthcoming

Abstract:
Conservation organizations seeking to reduce over-fishing and promote better fishing practices have increasingly turned to market-based mechanisms such as environmental sustainability labels (eco-labels) in order to shift patterns of household consumption. This paper presents an analysis of consumer response to an advisory for sustainable seafood adopted by a regional supermarket in the United States. The advisory consisted of a label in which one of three traffic light colors was placed on each fresh seafood product to inform consumers about its relative environmental sustainability. Green meant "best" choice, yellow meant "proceed with caution," and red meant "worst choice". Using a unique product-level panel scanner data set of weekly sales and taking advantage of the random phase-in of the advisory by the retailer, we apply a difference-in-differences identification strategy to estimate the effect of the advisory on overall seafood sales as well as the heterogeneous impact of the advisory by label color and whether the seafood met additional health-related criteria. We find evidence that the advisory led to a statistically significant 15.3% decline in overall seafood sales, a statistically significant 34.9% decline in the sale of yellow labeled seafood, and a statistically significant 41.3% decline in the sale of yellow labeled seafood on a mercury safe list. We find no statistically significant difference in sales of green or red labeled seafood.

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Should we be worried about the Green Paradox? Announcement effects of the acid rain program

Corrado Di Maria, Ian Lange & Edwin van der Werf
European Economic Review, forthcoming

Abstract:
This paper presents the first empirical test of the green paradox hypothesis, according to which well-intended but imperfectly implemented environmental policies may lead to detrimental outcomes due to supply side responses. We use the introduction of the Acid Rain Program in the U.S. as a case study. The theory predicts that owners of coal deposits, expecting future sales to decline, would supply more of their resource between the announcement of the Acid Rain Program and its implementation; moreover, the incentive to increase supply would be stronger for owners of high-sulfur coal. This would, all else equal, induce an increase in sulfur dioxide emissions. Using data on prices, heat input and sulfur content of coal delivered to U.S. power plants, we find strong evidence of a price decrease and of an increase in the sulfur premium, some indication that the amount of coal used might have increased, and no evidence of fuel-switching towards higher-sulfur coal. Overall, our evidence suggests that while the mechanism indicated by the theory might be at work, market conditions and concurrent regulation largely prevented a green paradox from arising. These results have implications for the design of climate policies.

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This Is Only a Test? Long-Run Impacts of Prenatal Exposure to Radioactive Fallout

Sandra Black et al.
NBER Working Paper, April 2013

Abstract:
Research increasingly shows that differences in endowments at birth need not be genetic but instead are influenced by environmental factors while the fetus is in the womb. In addition, these differences may persist well beyond childhood. In this paper, we study one such environmental factor - exposure to radiation - that affects individuals across the socio-economic spectrum. We use variation in radioactive exposure throughout Norway in the 1950s and early 60s, resulting from the abundance of nuclear weapon testing during that time period, to examine the effect of nuclear exposure in utero on outcomes such as IQ scores, education, earnings, and adult height. At this time, there was very little awareness in Norway about nuclear testing so our estimates are likely to be unaffected by avoidance behavior or stress effects. We find that exposure to nuclear radiation, even in low doses, leads to a decline in IQ scores of men aged 18. Moreover, radiation exposure leads to declines in education attainment, high school completion, and earnings among men and women. These results are robust to the choice of specification and the inclusion of sibling fixed effects.

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Discretionary compliance with mandatory environmental disclosures: Evidence from SEC filings

Gary Peters & Andrea Romi
Journal of Accounting and Public Policy, forthcoming

Abstract:
We examine the determinants of adherence to U.S. Securities and Exchange Commission (SEC) mandated disclosures of environmental sanctions. Our sample includes non-superfund U.S. Environmental Protection Agency (EPA) sanctions between 1996 and 2005. Our results suggest that firms are more likely to provide sanction disclosures if they operate in environmentally sensitive industries, are subject to larger penalties and are voluntarily participating in a supplemental environmental project. Our results also suggest that firms are less likely to disclose sanctions involving judicial proceedings. Overall, we find that voluntary disclosure incentives impact compliance with mandatory reporting requirements. Although incentives exist for firms to comply with mandatory disclosures, our results suggest that increases in mandatory environmental accounting disclosures may not be effective under the current regulatory system despite the use of bright-line materiality thresholds. Our study contributes to the current and ongoing debate about the role and effectiveness of environmental risk disclosure mandates in providing information to the marketplace, as well as "mandated disclosure" rules in general. The value attributed to current and potential environmental disclosure regulations cannot be thoroughly understood without examining disclosure compliance with existing regulations. From an environmental and sustainability disclosure perspective, our findings are particularly germane since these disclosures focus on risks, liabilities, or other reputational shortcomings of the firm.

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Re-Evaluating the Role of Energy Efficiency Standards: A Behavioral Economics Approach

Tsvetan Tsvetanov & Kathleen Segerson
Journal of Environmental Economics and Management, forthcoming

Abstract:
The economic models that prescribe Pigovian taxation as the first-best means of reducing energy-related externalities are typically based on the neoclassical model of rational consumer choice. Yet, consumer behavior in markets for energy-using durables is generally thought to be far from efficient, giving rise to the concept of the "energy-efficiency gap." This paper presents a welfare analysis of energy policies that is based on a behavioral model of temptation and self-control, introduced by Gul and Pesendorfer 23 and 24. We find that, in the presence of temptation, (i) Pigovian taxes alone do not yield a first-best outcome, (ii) when viewed as substitutes, energy efficiency standards can dominate Pigovian taxes, and (iii) a policy combining standards with a Pigovian tax can yield higher social welfare than a Pigovian tax alone, implying that the two instruments should be viewed as complements rather than substitutes.

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Do Voluntary Programs Reduce Pollution? Examining ISO 14001's Effectiveness across Countries

Matthew Potoski, Aseem Prakash
Policy Studies Journal, May 2013, Pages 273-294

Abstract:
Voluntary environmental programs have emerged as important instruments of environmental policy. Despite considerable scholarly scrutiny, there remain debates about whether they reduce pollution among participants, and their overall impact at the country level. We present a cross-national analysis of the efficacy of ISO 14001, the most widely adopted voluntary environmental program in the world. While several single country studies have explored the effect of ISO 14001 participation on pollution reduction at the facility level, this is the first article to assess (i) national level pollution reduction effects of ISO 14001 participation levels, (ii) across a large number of countries, and (iii) across two pollutants. We examine whether all else equal, the national level uptakes of ISO 14001 are associated with reductions in air emissions (sulfur dioxide, SO2) and water pollution (biochemical oxygen demand, BOD). Because firms, regulators, and environmental groups tend to focus more on visible types of pollution than less visible ones, we hypothesize that ISO 14001 uptake will be associated with more pronounced reductions in air pollution (visible) in relation to water pollution (less visible). Our analyses of pollution levels for a panel of 138 (72 for BOD) countries for the 1991-2005 period suggest that a 1 percent increase in aggregate levels of ISO 14001 adoption is associated with about a 0.064 percent reduction in SO2 emissions, all else equal. In contrast, we do not find a statistically significant relationship between ISO 14001 adoption levels and changes in water pollution (BOD).

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The Effect of Voluntary Brownfields Programs on Nearby Property Values: Evidence from Illinois

Joshua Linn
Journal of Urban Economics, forthcoming

Abstract:
Brownfields are properties whose redevelopment is hampered by known or suspected contamination and by concerns about associated liability. Because failing to redevelop brownfields may negatively affect welfare and the environment, a number of states have created voluntary programs to reduce liability risks and encourage redevelopment of brownfields. For clean or remediated properties, the state certifies that owners of such sites are not subject to federal or state liability under certain conditions. Certification could increase nearby property values because of decreased contamination risk and amenities associated with redeveloping the brownfield. This paper focuses on the Site Remediation Program in Illinois, and estimates the effect of brownfields certification on nearby property values. Employing several strategies to account for unobserved and time-varying variables that may be correlated with certification, I find that the entry and certification of a brownfield 0.25 miles away raises the value of a property by about 1 percent compared to an otherwise identical property.

By KEVIN LEWIS | 09:00:00 AM

Sunday, June 2, 2013

E pluribus unum

Uncertainty enhances the preference for narcissistic leaders

Barbora Nevicka et al.
European Journal of Social Psychology, forthcoming

Abstract:
Narcissistic leaders present us with an interesting paradox, because they have positive as well as negative characteristics. As such, we argue that the nature of the context determines how suitable narcissists are perceived to be as leaders. Here we propose that a specific contextual factor, that is, uncertainty, increases the preference for narcissists as leaders. As an initial test of this prediction, the first study showed that narcissistic characteristics were evaluated as more desirable in a leader in an uncertain context rather than a certain context. In Studies 2 and 3, we further hypothesized and found that high narcissists are chosen as leaders more often than low narcissists, especially in uncertain (rather than certain) contexts. In all of the studies, individuals were shown to be aware of the negative features of narcissistic leaders, such as arrogance and exploitativeness, but chose them as leaders in times of uncertainty, regardless. Thus, a narcissistic leader is perceived as someone who can help reduce individual uncertainty. These results reveal the importance of contextual uncertainty in understanding the allure of narcissistic leaders.

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A Putative Human Pheromone, Androstadienone, Increases Cooperation between Men

Paavo Huoviala & Markus Rantala
PLoS ONE, May 2013

Abstract:
Androstadienone, a component of male sweat, has been suggested to function as a human pheromone, an airborne chemical signal causing specific responses in conspecifics. In earlier studies androstadienone has been reported to increase attraction, affect subjects' mood, cortisol levels and activate brain areas linked to social cognition, among other effects. However, the existing psychological evidence is still relatively scarce, especially regarding androstadienone's effects on male behaviour. The purpose of this study was to look for possible behavioural effects in male subjects by combining two previously distinct branches of research: human pheromone research and behavioural game theory of experimental economics. Forty male subjects participated in a mixed-model, double-blind, placebo-controlled experiment. The participants were exposed to either androstadienone or a control stimulus, and participated in ultimatum and dictator games, decision making tasks commonly used to measure cooperation and generosity quantitatively. Furthermore, we measured participants' salivary cortisol and testosterone levels during the experiment. Salivary testosterone levels were found to positively correlate with cooperative behaviour. After controlling for the effects of participants' baseline testosterone levels, androstadienone was found to increase cooperative behaviour in the decision making tasks. To our knowledge, this is the first study to show that androstadienone directly affects behaviour in human males.

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Creatures of the night: Chronotypes and the Dark Triad traits

Peter Jonason, Amy Jones & Minna Lyons
Personality and Individual Differences, forthcoming

Abstract:
In this study (N = 263) we provide a basic test of a niche-specialization hypothesis of the Dark Triad (i.e., narcissism, psychopathy, and Machiavellianism). We propose that in order to best enact a "cheater strategy" those high on the Dark Triad traits should have optimal cognitive performance and, thus, have a night-time chronotype. Such a disposition will take advantage of the low light, the limited monitoring, and the lessened cognitive processing of morning-type people. The Dark Triad composite was correlated with an eveningness disposition. This link worked through links with the "darker" aspects of the Dark Triad (i.e., Machiavellianism, secondary psychopathy, and exploitive narcissism); correlations that were invariant across the sexes. While we replicated sex differences in the Dark Triad, we failed to replicate sex differences in chronotype, suggesting eveningness may not be a sexually selected trait as some have argued but is a trait under natural selective pressures to enable effective exploitations of conspecifics by both sexes.

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The Economic Returns to Social Interaction: Experimental Evidence from Microfinance

Benjamin Feigenberg, Erica Field & Rohini Pande
Review of Economic Studies, forthcoming

Abstract:
Microfinance clients were randomly assigned to repayment groups that met either weekly or monthly during their first loan cycle, and then graduated to identical meeting frequency for their second loan. Long-run survey data and a follow-up public goods experiment reveal that clients initially assigned to weekly groups interact more often and exhibit a higher willingness to pool risk with group members from their first loan cycle nearly two years after the experiment. They were also three times less likely to default on their second loan. Evidence from an additional treatment arm shows that, holding meeting frequency fixed, the pattern is insensitive to repayment frequency during the first loan cycle. Taken together, these findings constitute the first experimental evidence on the economic returns to social interaction, and provide an alternative explanation for the success of the group lending model in reducing default risk.

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The Digital Evolution of Occupy Wall Street

Michael Conover et al.
PLoS ONE, May 2013

Abstract:
We examine the temporal evolution of digital communication activity relating to the American anti-capitalist movement Occupy Wall Street. Using a high-volume sample from the microblogging site Twitter, we investigate changes in Occupy participant engagement, interests, and social connectivity over a fifteen month period starting three months prior to the movement's first protest action. The results of this analysis indicate that, on Twitter, the Occupy movement tended to elicit participation from a set of highly interconnected users with pre-existing interests in domestic politics and foreign social movements. These users, while highly vocal in the months immediately following the birth of the movement, appear to have lost interest in Occupy related communication over the remainder of the study period.

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A Different Perspective: The Multiple Effects of Deep Level Diversity on Group Creativity

Sarah Harvey
Journal of Experimental Social Psychology, forthcoming

Abstract:
Although generally accepted in the literature on group diversity, the view that groups can improve their creativity by drawing on the diverse perspectives of group members has received surprisingly limited examination or empirical support. This paper considers the role of deep level diversity in group creativity, highlighting that while deep diversity may improve divergent processes in groups, it may also hamper groups' ability to converge around creative ideas. Two experimental studies demonstrate that deep level diversity leads to less creatively elaborated and integrated ideas. In addition, the studies revealed that when groups must converge around a single output, the challenges of deep level diversity outweigh the benefits of divergent idea generation. A detailed analysis of the interactions of 27 groups finds that this effect occurs because deep diversity changes a group's creative process. This study contributes to our understanding of the creative process in groups with detailed analysis of video-taped group interactions. It challenges the assumed advantages of deep level diversity to group creativity, and suggests that the brainstorming process that groups are typically advised to use to promote creativity may not be the best way to develop creative final output.

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Good Things Come to Those Who Wait: Late First Offers Facilitate Creative Agreements in Negotiation

Marwan Sinaceur et al.
Personality and Social Psychology Bulletin, June 2013, Pages 814-825

Abstract:
Although previous research has shown that making the first offer leads to a distributive advantage in negotiations, the current research explored how the timing of first offers affects the creativity of negotiation agreements. We hypothesized that making the first offer later rather than earlier in the negotiation would facilitate the discovery of creative agreements that better meet the parties' underlying interests. Experiment 1 demonstrated that compared with early first offers, late first offers facilitated creative agreements that better met the parties' underlying interests. Experiments 2a and 2b controlled for the duration of the negotiation and conceptually replicated this effect. The last two studies also demonstrated that the beneficial effect of late first offers was mediated by greater information exchange. Thus, negotiators need to consider the timing of first offers to fully capitalize on the first offer advantage. Implications for our understanding of creativity, motivated information exchange, and timing in negotiations are discussed.

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To Conform or Not to Conform: Spontaneous Conformity Diminishes the Sensitivity to Monetary Outcomes

Rongjun Yu & Sai Sun
PLoS ONE, May 2013

Abstract:
When people have different opinions in a group, they often adjust their own attitudes and behaviors to match the group opinion, known as social conformity. The affiliation account of normative conformity states that people conform to norms in order to ‘fit in', whereas the accuracy account of informative conformity posits that the motive to learn from others produces herding. Here, we test another possibility that following the crowd reduces the experienced negative emotion when the group decision turns out to be a bad one. Using event related potential (ERP) combined with a novel group gambling task, we found that participants were more likely to choose the option that was predominately chosen by other players in previous trials, although there was little explicit normative pressure at the decision stage and group choices were not informative. When individuals' choices were different from others, the feedback related negativity (FRN), an ERP component sensitive to losses and errors, was enhanced, suggesting that being independent is aversive. At the outcome stage, the losses minus wins FRN effect was significantly reduced following conformity choices than following independent choices. Analyses of the P300 revealed similar patterns both in the response and outcome period. Our study suggests that social conformity serves as an emotional buffer that protects individuals from experiencing strong negative emotion when the outcomes are bad.

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Cooperation during cultural group formation promotes trust towards members of out-groups

Xiaofei Sophia Pan & Daniel Houser
Proceedings of the Royal Society: Biological Sciences, 7 July 2013

Abstract:
People often cooperate with members of their own group, and discriminate against members of other groups. Previous research establishes that cultural groups can form endogenously, and that these groups demonstrate in-group favouritism. Given the presence of cultural groups, the previous literature argues that cultural evolution selects for groups that exhibit parochial altruism. The source of initial variation in these traits, however, remains uninformed. We show here that a group's economic production environment may substantially influence parochial tendencies, with groups formed around more cooperative production (CP) displaying less parochialism than groups formed around more independent production (IP) processes. Participants randomized into CP and IP production tasks formed cultural groups, and subsequently played hidden-action trust games with in-group and out-group trustees. We found CP to be associated with significantly greater sharing and exchanging behaviours than IP. In trust games, significant parochial altruism (in-group favouritism combined with out-group discrimination) was displayed by members of IP groups. By contrast, members of CP groups did not engage in either in-group favouritism or out-group discrimination. Further, we found the absence of out-group discrimination in CP to persist even following ‘betrayal'. Finally, belief data suggest that members of CP are not more intrinsically generous than IP members, but rather more likely to believe that out-group trustees will positively reciprocate. Our results have important implications for anyone interested in building cooperative teams, and shed new light on connections between culture and cooperation.

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The Communication of "Pure" Group-Based Anger Reduces Tendencies Toward Intergroup Conflict Because It Increases Out-Group Empathy

Bart de Vos et al.
Personality and Social Psychology Bulletin, forthcoming

Abstract:
The communication of group-based anger in intergroup conflict is often associated with destructive conflict behavior. However, we show that communicating group-based anger toward the out-group can evoke empathy and thus reduce intergroup conflict. This is because it stresses the value of maintaining a positive long-term intergroup relationship, thereby increasing understanding for the situation (in contrast to the communication of the closely related emotion of contempt). Three experiments demonstrate that the communication of group-based anger indeed reduces destructive conflict intentions compared with (a) a control condition (Experiments 1-2), (b) the communication of group-based contempt (Experiment 2), and (c) the communication of a combination of group-based anger and contempt (Experiments 2-3). Moreover, results from all three experiments reveal that empathy mediated the positive effect of communicating "pure" group-based anger. We discuss the implications of these findings for the theory and practice of communicating emotions in intergroup conflicts.

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No trust on the left side: Hemifacial asymmetries for trustworthiness and emotional expressions

Matia Okubo, Kenta Ishikawa & Akihiro Kobayashi
Brain and Cognition, July 2013, Pages 181-186

Abstract:
People can discriminate cheaters from cooperators by their appearance. However, successful cheater detection can be thwarted by a posed smile, which cheaters display with greater emotional intensity than cooperators. The present study investigated the underlying neural and cognitive mechanisms of a posed smile, which cheaters use to conceal their anti-social attitude, in terms of hemifacial asymmetries of emotional expressions. Raters (50 women and 50 men) performed trustworthiness judgments on composite faces of cheaters and cooperators, operationally defined by the number of deceptions in an economic game. The left-left composites of cheaters were judged to be more trustworthy than the right-right composites when the models posed a happy expression. This left-hemiface advantage for the happy expression was not observed for cooperators. In addition, the left-hemiface advantage of cheaters disappeared for the angry expression. These results suggest that cheaters used the left hemiface, which is connected to the emotional side of the brain (i.e., the right hemisphere), more effectively than the right hemiface to conceal their anti-social attitude.

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Low-ball and compliance: Commitment even if the request is a deviant one

Nicolas Guéguen & Alexandre Pascual
Social Influence, forthcoming

Abstract:
Low-balling is a technique designed to gain compliance by making a very attractive initial offer to induce a person to accept the offer and then making the terms less favorable. Studies have shown that this approach is more successful than when the less favorable request is made directly. However, the effect of this technique on more problematic and costly requests remained in question. In two experimental field studies, a request was made to participants and, after agreeing, they were informed that the request referred to deviant behaviors. Results showed that the low-ball technique remained effective with both men and women. The theoretical power of commitment is discussed to explain these results.

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The value of a smile: Facial expression affects ultimatum-game responses

Patrick Mussel, Anja Göritz & Johannes Hewig
Judgment and Decision Making, May 2013, Pages 381-385

Abstract:
In social interaction, the facial expression of an opponent contains information that may influence the interaction. We asked whether facial expression affects decision-making in the ultimatum game. In this two-person game, the proposer divides a sum of money into two parts, one for each player, and then the responder decides whether to accept the or reject it. Rejection means that neither player gets any money. Results of a large-sample study support our hypothesis that offers from proposers with a smiling facial expression are more often accepted, compared to a neutral facial expression. Moreover, we found lower acceptance rates for offers from proposers with an angry facial expression.

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Sidestepping awkward encounters: Avoidance as a response to outperformance-related discomfort

Julie Juola Exline, Anne Zell & Marci Lobel
Journal of Applied Social Psychology, April 2013, Pages 706-720

Abstract:
When people believe that their higher performance poses a threat to another person, they may experience discomfort or concern that has been termed Sensitivity to being the Target of a Threatening Upward Comparison (STTUC). One way to reduce STTUC discomfort might be to avoid contact with the outperformed person, a possibility examined in three studies of undergraduates. In laboratory contexts, STTUC discomfort predicted reluctance to meet an outperformed peer (Study 1) and preference for a different partner in future competitions (Study 2). In Study 3, which focused on naturalistic outperformance situations, STTUC distress again predicted avoidance. Additionally, avoidance of contact predicted less satisfaction with outcomes, especially in relationships where people knew each other well.

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Cooperation creates selection for tactical deception

Luke McNally & Andrew Jackson
Proceedings of the Royal Society: Biological Sciences, 7 July 2013

Abstract:
Conditional social behaviours such as partner choice and reciprocity are held to be key mechanisms facilitating the evolution of cooperation, particularly in humans. Although how these mechanisms select for cooperation has been explored extensively, their potential to select simultaneously for complex cheating strategies has been largely overlooked. Tactical deception, the misrepresentation of the state of the world to another individual, may allow cheaters to exploit conditional cooperation by tactically misrepresenting their past actions and/or current intentions. Here we first use a simple game-theoretic model to show that the evolution of cooperation can create selection pressures favouring the evolution of tactical deception. This effect is driven by deception weakening cheater detection in conditional cooperators, allowing tactical deceivers to elicit cooperation at lower costs, while simple cheats are recognized and discriminated against. We then provide support for our theoretical predictions using a comparative analysis of deception across primate species. Our results suggest that the evolution of conditional strategies may, in addition to promoting cooperation, select for astute cheating and associated psychological abilities. Ultimately, our ability to convincingly lie to each other may have evolved as a direct result of our cooperative nature.

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Cognitive load causes people to react ineffectively to others' norm transgressions

Anabel Fonseca et al.
Journal of Applied Social Psychology, forthcoming

Abstract:
We examined whether cognitive resources are necessary to react effectively to norm transgressions of others. In Study 1, we showed that a polite verbal expression of disapproval was the most effective form of social control because perpetrators were least likely to engage in the same norm transgression again in the future. In Study 2, we manipulated cognitive load and asked participants how they would react when witnessing different uncivil behaviors. Compared to participants in the cognitive load condition, participants in the control condition were more likely to use effective forms of social control and less likely to use ineffective forms of social control. The findings are integrated with recent theorizing about normative pressures and people's reactions to deviance.

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Do humans really punish altruistically? A closer look

Eric Pedersen, Robert Kurzban & Michael McCullough
Proceedings of the Royal Society: Biological Sciences, 7 May 2013

Abstract:
Some researchers have proposed that natural selection has given rise in humans to one or more adaptations for altruistically punishing on behalf of other individuals who have been treated unfairly, even when the punisher has no chance of benefiting via reciprocity or benefits to kin. However, empirical support for the altruistic punishment hypothesis depends on results from experiments that are vulnerable to potentially important experimental artefacts. Here, we searched for evidence of altruistic punishment in an experiment that precluded these artefacts. In so doing, we found that victims of unfairness punished transgressors, whereas witnesses of unfairness did not. Furthermore, witnesses' emotional reactions to unfairness were characterized by envy of the unfair individual's selfish gains rather than by moralistic anger towards the unfair behaviour. In a second experiment run independently in two separate samples, we found that previous evidence for altruistic punishment plausibly resulted from affective forecasting error - that is, limitations on humans' abilities to accurately simulate how they would feel in hypothetical situations. Together, these findings suggest that the case for altruistic punishment in humans - a view that has gained increasing attention in the biological and social sciences - has been overstated.

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Collective action and the detrimental side of punishment

Shade Shutters
Evolutionary Psychology, April 2013, Pages 327-346

Abstract:
Cooperative behavior is the subject of intense study in a wide range of scientific fields, yet its evolutionary origins remain largely unexplained. A leading explanation of cooperation is the mechanism of altruistic punishment, where individuals pay to punish others but receive no material benefit in return. Experiments have shown such punishment can induce cooperative outcomes in social dilemmas, though sometimes at the cost of reduced social welfare. However, experiments typically examine the effects of punishing low contributors without allowing others in the environment to respond. Thus, the full ramifications of punishment may not be well understood. Here, I use evolutionary simulations of agents playing a continuous prisoners dilemma to study behavior subsequent to an act of punishment, and how that subsequent behavior affects the efficiency of payoffs. Different network configurations are used to better understand the relative effects of social structure and individual strategies. Results show that when agents can either retaliate against their punisher, or punish those who ignore cheaters, the cooperative effects of punishment are reduced or eliminated. The magnitude of this effect is dependent on the density of the network in which the population is embedded. Overall, results suggest that a better understanding of the aftereffects of punishment is needed to assess the relationship between punishment and cooperative outcomes.

By KEVIN LEWIS | 09:00:00 AM

Saturday, June 1, 2013

Motivational

Peers, Pressure, and Performance at the National Spelling Bee

Jonathan Smith
Journal of Human Resources, Spring 2013, Pages 265-285

Abstract:
This paper investigates how individuals' performances of a cognitive task in a high-pressure competition are affected by their peers' performances. To do so, I use novel data from the National Spelling Bee, in which students attempt to spell words correctly in a tournament setting. Across OLS and instrumental variables approaches, I find that when the immediate predecessor is correct, a speller has a 13 to 64 percent greater probability of making a mistake, relative to the predecessor being incorrect. There is no evidence that the effect differs by gender and marginal evidence that it differs by experience.

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Dying to watch: Thoughts of death and preferences for sexual media content

Laramie Taylor
Journal of Media Psychology, Spring 2013, Pages 55-64

Abstract:
Research has shown that thoughts about death influence sexual cognitions and some media choices. The present study tested the hypothesis that thoughts about death may affect individuals' tendency to select or avoid entertainment media programming containing sexual material. In two experiments, thoughts about death (mortality salience [MS]) were manipulated before college undergraduates expressed interest in viewing television shows and movies with varying amounts of sexual content. In both studies, MS was associated with greater overall interest in sexual media content. Although terror management theory would indicate that sexual worldview should moderate this effect, this was not observed to be the case. In addition, MS was not found to affect interest in other types of highly engaging media content including violent and dramatic content. Limitations regarding generalizability are discussed. Results suggest that MS increases a preference for sexual media content, and that this occurs for individuals with diverse sexual values systems. This is discussed in terms of implications for terror management theory and cognitive models of media influence.

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Consequences of Beliefs about the Malleability of Creativity

Alexander O'Connor, Charlan Nemeth & Satoshi Akutsu
Creativity Research Journal, Spring 2013, Pages 155-162

Abstract:
Attempts to maximize creativity pervade corporate, artistic, and scientific domains. This research investigated how individual's lay beliefs about the malleability of creativity affect several measures of creative potential. Two correlational and 1 experimental study examined the relationship between malleability beliefs about creativity and creative problem-solving and prior creative achievement. In Study 1, incremental beliefs in creativity were associated with interest in creative thinking, self-reported creativity, and creative problem-solving. In Study 2, incremental beliefs were associated with prior creative achievement in a cross-cultural, professional sample. In Study 3, incremental primes of creativity led to improved creative problem-solving. All studies provide discriminant validity and domain-specificity for malleability beliefs in creativity. Specifically, Studies 1 and 2 controlled for individual differences in beliefs about the malleability of intelligence, suggesting that malleability beliefs of creativity and intelligence are meaningfully distinct. Meanwhile, Study 3 found that incremental beliefs of creativity enhance creative problem-solving but not problem-solving more generally.

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Should Managers Use Team-Based Contests?

Hua Chen & Noah Lim
Management Science, forthcoming

Abstract:
When designing contests to motivate employees, should managers organize employees to compete in teams or as individuals? We develop a behavioral economics model that shows that if contestants are averse to being responsible for the team's loss, a team-based (TB) contest can yield higher effort than an individual-based (IB) contest. This prediction is contrary to those of standard economics models, which favor IB contests over TB contests. We test the competing predictions using laboratory economics experiments. The results show that when contestants do not know each other, average effort levels in the TB and IB contests are not different. When contestants are allowed to socialize with potential teammates before making effort decisions, TB contests yield higher effort relative to IB contests. We also show that the relative efficacy of TB contests is driven by contestants' aversion to letting their team down.

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Does implicit theory of intelligence cause achievement goals? Evidence from an experimental study

Felix Dinger & Oliver Dickhäuser
International Journal of Educational Research, forthcoming

Abstract:
The reported experiment tested if individuals' subjective belief about the malleability of intelligence causes their achievement goals. Eighty university students were randomly assigned to read one of two articles portraying intelligence as a learned vs. an innate ability (incremental condition vs. entity condition). Afterward, we assessed subjects' implicit theory of intelligence and achievement goals. Subjects in the incremental condition recalled a significantly lower heritability of intelligence and more strongly endorsed an incremental view of intelligence than those in the entity condition. Furthermore, subjects held higher levels of mastery goals and lower levels of performance-avoidance goals in the incremental condition than in the entity condition. Finally, the effect of experimental condition on mastery goals was mediated by subjects' implicit theory of intelligence. Findings suggest that highlighting intellectual abilities as malleable rather than fixed creates motivationally more adaptive learning environments.

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Children's Naive Theories of Intelligence Influence Their Metacognitive Judgments

David Miele, Lisa Son & Janet Metcalfe
Child Development, forthcoming

Abstract:
Recent studies have shown that the metacognitive judgments adults infer from their experiences of encoding effort vary in accordance with their naive theories of intelligence. To determine whether this finding extends to elementary schoolchildren, a study was conducted in which 27 third graders (Mage = 8.27) and 24 fifth graders (Mage = 10.39) read texts presented in easy- or difficult-to-encode fonts. The more children in both grades viewed intelligence as fixed, the less likely they were to interpret effortful or difficult encoding as a sign of increasing mastery and the more likely they were to report lower levels of comprehension as their perceived effort increased. This suggests that children may use naive theories of intelligence to make motivationally relevant inferences earlier than previously thought.

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Self-talk and Competitive Sport Performance

Antonis Hatzigeorgiadis et al.
Journal of Applied Sport Psychology, forthcoming

Abstract:
The purpose of the present study was to test the effectiveness of a 10-week self-talk intervention on competitive performance in young swimmers. Participants were 41 swimmers (mean age 14.59 ± 1.58 years), whose performance was recorded on two competitive occasions with a 10-week interval. In-between the two competitions, participants in the intervention group followed a self-talk training program. The results showed that the intervention group had greater performance improvements than the control group, thus supporting the effectiveness of the program in enhancing sport performance in a competitive environment. The findings provide directions for the development of effective self-talk interventions.

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Stutter-Step Models of Performance in School

Stephen Morgan et al.
Social Forces, June 2013, Pages 1451-1474

Abstract:
To evaluate a stutter-step model of academic performance in high school, this article adopts a unique measure of the beliefs of 12,591 high school sophomores from the Education Longitudinal Study, 2002-2006. Verbatim responses to questions on occupational plans are coded to capture specific job titles, the listing of multiple jobs, and the listing of multiple jobs with divergent characteristics. The educational requirements of detailed jobs, as specified in the Department of Labor's Occupational Information Network database, are then matched to all jobs that students list within their plans. Students with uncertain beliefs about their occupational futures are then shown to have lower levels of commitment to and performance in school. These results support the conjecture that uncertainty about the future has consequences for the short-run behavior that determines important educational outcomes, beyond the effects that are commonly attributed to existing models of performance.

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Grades as incentives

Darren Grant & William Green
Empirical Economics, June 2013, Pages 1563-1592

Abstract:
This paper examines how grade incentives affect student learning across a variety of courses at two universities, using for identification the discrete rewards offered by the standard A-F letter-grade system. We develop and test five predictions about the provision of study effort and the distribution of numerical course averages in the presence of the thresholds that separate these discrete rewards. Surprisingly, all are rejected in our data. There is no evidence that exam performance is improved for those students that stand to gain the most from additional study.

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Joking in the face of death: A terror management approach to humor production

Christopher Long & Dara Greenwood
Humor, forthcoming

Abstract:
Terror management theory has spawned a body of experimental research documenting a multitude of defensive responses to mortality salience manipulations (e.g., rigid adherence to dominant cultural values, self-esteem bolstering). Another substantive body of work suggests that humor functions as a natural and often effective means of down-regulating stressful or traumatic experiences. Integrating a terror management paradigm with a cartoon captioning task, the present study finds that participants subliminally primed with death wrote funnier captions than those primed with pain, as judged by outside raters. Interestingly, a reverse pattern was obtained for participants' own ratings of their captions; explicitly death-primed participants rated themselves more successful at generating humorous captions than their pain-primed counterparts, while no significant difference emerged between the two subliminal priming conditions. Findings contribute new insights to recent research suggesting that death reminders may sometimes facilitate creativity and open-mindedness.

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Existential motive underlying cosmetic surgery: A terror management analysis

Kim-Pong Tam
Journal of Applied Social Psychology, May 2013, Pages 947-955

Abstract:
Why do people consider cosmetic surgery? Based on the terror management theory, the present research identifies an existential motive: Through cosmetic surgery, people can symbolically defend against their death anxiety. A correlational study and an experiment showed that death terror, whether operationalized as individual differences in fear of death or experimentally manipulated mortality salience, was associated with stronger acceptance of cosmetic surgery. This association was absent among participants who did not consider physical appearance important, and weaker among those who were satisfied about their appearance. Also, this association was particularly strong among those with high explicit self-esteem. This concurs with the recent theoretical development about the role of self-esteem in symbolic defenses against death terror.

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Rebels with a cause: A goal conflict approach to understanding when conscientious people dissent

Dominic Packer, Kentaro Fujita & Scott Herman
Journal of Experimental Social Psychology, forthcoming

Abstract:
Highly conscientious people are more likely than others to actively pursue their goals, but whether their goals support the status quo and result in conformity, or are pursuant of social change and result in dissent is likely to depend on other factors, including how they subjectively construe dissent decisions. We propose a goal conflict approach to dissent, positing that dissent (vs. conformity) is motivated by concern for broad/long-term (vs. local/short-term) group outcomes: a preference for change and improvement as opposed to stability and group enhancement. Two experiments employed a construal level manipulation to shift the goals of group members varying in conscientiousness. As predicted, high-level (vs. low-level) construal promoted greater willingness to articulate (Study 1) and actually express (Study 2) non-normative ingroup criticism among highly conscientious individuals.

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The Motivational Dynamics of Dissent Decisions: A Goal-Conflict Approach

Dominic Packer, Kentaro Fujita & Alison Chasteen
Social Psychological and Personality Science, forthcoming

Abstract:
We propose that dissent decisions involve a tension between shorter term group stability goals and longer term group change goals. Strongly identified members may be animated by either goal, and their behavior with respect to group norms is influenced by which is currently dominant. In two experiments, we manipulated construal level, a factor that affects goal selection, such that people are more likely to make decisions that further long-term goals at high (vs. low) construal level. As predicted, at high construal level, strong identifiers were more willing to dissent from group norms than weak identifiers; at low construal level, strong identifiers were equally or more conformist. These findings advance understanding of the motivational dynamics of dissent decisions and speak to the nature of depersonalization/self-categorization in groups. Identified members retained individual agency and exercised their own judgment regarding group norms, choosing to deviate when they perceived it to be in the group's interest.

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Self-Esteem Instability and Academic Outcomes in American and Chinese College Students

Virgil Zeigler-Hill et al.
Journal of Research in Personality, forthcoming

Abstract:
The connection between self-esteem instability and various academic outcomes was examined across two studies. Study 1 (N = 419) found that unstable self-esteem was associated with poor academic performance for American undergraduate college students. Further, unstable self-esteem was associated with higher levels of academic disengagement and devaluation for individuals with high levels of self-esteem. Study 2 included college students from the United States (N = 167) and China (N = 178). As in Study 1, unstable self-esteem was associated with poor academic performance and higher levels of academic devaluation for individuals with high levels of self-esteem. However, the association between unstable self-esteem and academic disengagement emerged only for American college students with high self-esteem.

By KEVIN LEWIS | 09:00:00 AM

Friday, May 31, 2013

Poles apart

Political Extremism Is Supported by an Illusion of Understanding

Philip Fernbach et al.
Psychological Science, forthcoming

Abstract:
People often hold extreme political attitudes about complex policies. We hypothesized that people typically know less about such policies than they think they do (the illusion of explanatory depth) and that polarized attitudes are enabled by simplistic causal models. Asking people to explain policies in detail both undermined the illusion of explanatory depth and led to attitudes that were more moderate (Experiments 1 and 2). Although these effects occurred when people were asked to generate a mechanistic explanation, they did not occur when people were instead asked to enumerate reasons for their policy preferences (Experiment 2). Finally, generating mechanistic explanations reduced donations to relevant political advocacy groups (Experiment 3). The evidence suggests that people's mistaken sense that they understand the causal processes underlying policies contributes to political polarization.

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Media and Political Polarization

Markus Prior
Annual Review of Political Science, 2013, Pages 101-127

Abstract:
This article examines if the emergence of more partisan media has contributed to political polarization and led Americans to support more partisan policies and candidates. Congress and some newer media outlets have added more partisan messages to a continuing supply of mostly centrist news. Although political attitudes of most Americans have remained fairly moderate, evidence points to some polarization among the politically involved. Proliferation of media choices lowered the share of less interested, less partisan voters and thereby made elections more partisan. But evidence for a causal link between more partisan messages and changing attitudes or behaviors is mixed at best. Measurement problems hold back research on partisan selective exposure and its consequences. Ideologically one-sided news exposure may be largely confined to a small, but highly involved and influential, segment of the population. There is no firm evidence that partisan media are making ordinary Americans more partisan.

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Liberellas versus Konservatives: Social Status, Ideology, and Birth Names in the United States

Eric Oliver, Thomas Wood & Alexandra Bass
University of Chicago Working Paper, April 2013

Abstract:
Despite much public speculation, there is little scholarly research on whether or how ideology shapes American consumer behavior. Borrowing from previous studies, we theorize that ideology is associated with different forms of taste and conspicuous consumption: liberals are more drawn to indicators of "cultural capital" and more feminine symbols while conservatives favor more explicit signs of "economic capital" and masculine cues. These ideas are tested using birth certificate, U.S. Census, and voting records from California in 2004. We find strong differences in birth naming practices related to race, economic status, and ideology. Although higher status mothers of all races favor more popular birth names, high status liberal mothers more often choose uncommon, culturally obscure birth names. Liberals also favor birth names with "softer, feminine" sounds while conservatives favor names with "harder, masculine" phonemes. These findings have significant implications for both studies of consumption and debates about ideology and political fragmentation in the United States.

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Communication, Persuasion, and the Conditioning Value of Selective Exposure: Like Minds May Unite and Divide but They Mostly Tune Out

Kevin Arceneaux, Martin Johnson & John Cryderman
Political Communication, Spring 2013, Pages 213-231

Abstract:
Political observers of all types often express concerns that Americans are dangerously polarized on political issues and are, in part due to the availability of opinionated niche news programming (e.g., ideological cable, radio, and Internet news sources), developing more entrenched political positions. However, these accounts often overlook the fact that the rise of niche news has been accompanied by the expansion of entertainment options and the ability to screen out political news altogether. We examine the polarizing effects of opinionated political talk shows by integrating the Elaboration Likelihood Model of attitude development into our own theoretical model of selective media exposure. We employ a novel experimental design that gives participants agency to choose among news and entertainment programming by including treatments that allow participants to select the programming they view. The results from two studies show that ideological shows do indeed have the power to polarize political attitudes, especially among individuals who possess strong motivations to craft counterarguments. However, the polarizing force of cable news is diminished considerably when individuals are given the option to tune out.

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Has Growing Income Inequality Polarized the American Electorate? Class, Party, and Ideological Polarization

Bryan Dettrey & James Campbell
Social Science Quarterly, forthcoming

Objectives: We investigate whether growing income inequality has heightened differences in economic interests between "the haves" and "the have nots" and if this class polarization has increased ideological polarization in the electorate.

Methods: We examine the trend in ideological orientation among low- and high-income voters from 1972 to 2008.

Results: While both income inequality and ideological polarization have increased in recent years, this analysis indicates that the growth in ideological polarization is not the result of growing income inequality. The well-off have not become significantly more conservative and less liberal nor have those on the lower rungs of the economic ladder become significantly more liberal and less conservative.

Conclusion: The analysis indicates that ideological polarization is the result of the increased polarization of the political parties, not class polarization.

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Who is Your Preferred Neighbor? Partisan Residential Preferences and Neighborhood Satisfaction

Iris Hui
American Politics Research, forthcoming

Abstract:
Do people specifically seek to live among political co-partisans when they relocate? Does the partisan composition of the neighborhood affect their level of residential satisfaction? Drawing on survey data and a survey-embedded experiment, I find that people have a clear preference for co-partisans. Both Republican and Democrat identifiers prefer more co-partisans in their neighborhood. Although the preference is not the primary factor in deciding where to settle, the partisan composition of a neighborhood does affect an individual's sense of neighborhood satisfaction. Results from a survey-embedded experiment show that respondents' subjective satisfaction is sensitive to objective facts about their neighborhood. Respondents' satisfaction slightly decreases when told their neighborhood has a higher presence of members of the opposite party than perceived.

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The Impact of Elite Polarization on Partisan Ambivalence and Indifference

Judd Thornton
Political Behavior, June 2013, Pages 409-428

Abstract:
Considerable evidence documents the impact that elite polarization has had on the influence of partisanship on vote choice and attitudes. Yet, much of the electorate remains moderate. This paper seeks to shed some light on this paradox. Examining trends from 1952 to 2004 demonstrates that the electorate is now more opinionated about the parties than in the recent past, but that a significant portion of the increase is in the form of negative statements about an individual's party - there are fewer indifferent individuals, but the electorate is not overwhelmingly more one-sided, instead there has been an increase in both the proportion of one-sided and ambivalent individuals. It is next examined if the intensity of one's ideological and partisan self-identification influences how they respond to elite polarization. The results suggest that non-ideologues and pure independents are more likely to be indifferent; all other groups have shown a decline in the likelihood of being indifferent and an increase in ambivalence. The results demonstrate that the public is responding to the increased clarity in elite positions in the form of an increased number of opinions, but for many the increase results from a mix of positive and negative reactions.

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Sophisticated and myopic? Citizen preferences for Electoral College reform

John Aldrich, Jason Reifler & Michael Munger
Public Choice, forthcoming

Abstract:
Different institutions can produce more (or less) preferred outcomes, in terms of citizens' preferences. Consequently, citizen preferences over institutions may "inherit"-to use William Riker's term-the features of preferences over outcomes. But the level of information and understanding required for this effect to be observable seems quite high. In this paper, we investigate whether Riker's intuition about citizens acting on institutional preferences is borne out by an original empirical dataset collected for this purpose. These data, a survey commissioned specifically for this project, were collected as part of a larger nationally representative sample conducted right before the 2004 election. The results show that support for a reform to split a state's Electoral College votes proportionally is explained by (1) which candidate one supports, (2) which candidate one thinks is likely to win the election under the existing system of apportionment, (3) preferences for abolishing the Electoral College in favor of the popular vote winner, and (4) statistical interactions between these variables. In baldly political terms, Kerry voters tend to support splitting their state's Electoral College votes if they felt George W. Bush was likely to win in that state. But Kerry voters who expect Kerry to win their state favor winner-take-all Electoral College rules for their state. In both cases, mutatis mutandis, the reverse is true for Bush voters.

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Political Polarization and the Dynamics of Political Language: Evidence from 130 Years of Partisan Speech

Jacob Jensen et al.
Brookings Papers on Economic Activity, Fall 2012, Pages 1-81

Abstract:
We use the digitized Congressional Record and the Google Ngrams corpus to study the polarization of political discourse and the diffusion of political language since 1873. We statistically identify highly partisan phrases from the Congressional Record and then use these to impute partisanship and political polarization to the Google Books corpus between 1873 and 2000. We find that although political discourse expressed in books did become more polarized in the late 1990s, polarization remained low relative to the late 19th and much of the 20th century. We also find that polarization of discourse in books predicts legislative gridlock, but polarization of congressional language does not. Using a dynamic panel data set of phrases, we find that polarized phrases increase in frequency in Google Books before their use increases in congressional speech. Our evidence is consistent with an autonomous effect of elite discourse on congressional speech and legislative gridlock, but this effect is not large enough to drive the recent increase in congressional polarization.

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The social consequences of conspiracism: Exposure to conspiracy theories decreases intentions to engage in politics and to reduce one's carbon footprint

Daniel Jolley & Karen Douglas
British Journal of Psychology, forthcoming

Abstract:
The current studies explored the social consequences of exposure to conspiracy theories. In Study 1, participants were exposed to a range of conspiracy theories concerning government involvement in significant events such as the death of Diana, Princess of Wales. Results revealed that exposure to information supporting conspiracy theories reduced participants' intentions to engage in politics, relative to participants who were given information refuting conspiracy theories. This effect was mediated by feelings of political powerlessness. In Study 2, participants were exposed to conspiracy theories concerning the issue of climate change. Results revealed that exposure to information supporting the conspiracy theories reduced participants' intentions to reduce their carbon footprint, relative to participants who were given refuting information, or those in a control condition. This effect was mediated by powerlessness with respect to climate change, uncertainty, and disillusionment. Exposure to climate change conspiracy theories also influenced political intentions, an effect mediated by political powerlessness. The current findings suggest that conspiracy theories may have potentially significant social consequences, and highlight the need for further research on the social psychology of conspiracism.

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The Political Consequences of Uninformed Voters

Anthony Fowler & Michele Margolis
Harvard Working Paper, February 2012

Abstract:
Survey researchers have long known that Americans fail to meet the democratic ideal of an informed electorate. The consequences of this political ignorance, however, are less clear. In two independent settings, we experimentally test the effect of political information on citizens' attitudes toward the major parties. In our first experiment we use a three-wave panel design to capture the effects of political knowledge and assess whether political information has a lasting effect on partisan attitudes. In our second experiment we replicate our findings on the Congressional Cooperative Election Study using a more nationally representative sample. When uninformed citizens receive political information, they systematically shift their political preferences away from the Republican Party and toward the Democrats. In contrast to the optimistic claims that political ignorance is offset through other mechanisms, the American electorate's lack of information typically produces results that differ from the ideal counterfactual world in which all voters are informed.

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Why Does Balanced News Produce Unbalanced Views?

Edward Glaeser & Cass Sunstein
NBER Working Paper, April 2013

Abstract:
Many studies find that presentation of balanced information, offering competing positions, can promote polarization and thus increase preexisting social divisions. We offer two explanations for this apparently puzzling phenomenon. The first involves what we call asymmetric Bayesianism: the same information can have diametrically opposite effects if those who receive it have opposing antecedent convictions. Recipients whose beliefs are buttressed by the message, or a relevant part, rationally believe that it is true, while recipients whose beliefs are at odds with that message, or a relevant part, rationally believe that the message is false (and may reflect desperation). The second explanation is that the same information can activate radically different memories and associated convictions, thus producing polarized responses to that information, or what we call a memory boomerang. An understanding of these explanations reveals when balanced news will produce unbalanced views. The explanations also account for the potential influence of "surprising validators." Because such validators are credible to the relevant audience, they can reduce the likelihood of asymmetric Bayesianism, thus promoting agreement.

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"Not for All the Tea in China!" Political Ideology and the Avoidance of Dissonance-Arousing Situations

Hannah Nam, John Jost & Jay Van Bavel
PLoS ONE, April 2013

Abstract:
People often avoid information and situations that have the potential to contradict previously held beliefs and attitudes (i.e., situations that arouse cognitive dissonance). According to the motivated social cognition model of political ideology, conservatives tend to have stronger epistemic needs to attain certainty and closure than liberals. This implies that there may be differences in how liberals and conservatives respond to dissonance-arousing situations. In two experiments, we investigated the possibility that conservatives would be more strongly motivated to avoid dissonance-arousing tasks than liberals. Indeed, U.S. residents who preferred more conservative presidents (George W. Bush and Ronald Reagan) complied less than Americans who preferred more liberal presidents (Barack Obama and Bill Clinton) with the request to write a counter-attitudinal essay about who made a "better president." This difference was not observed under circumstances of low perceived choice or when the topic of the counter-attitudinal essay was non-political (i.e., when it pertained to computer or beverage preferences). The results of these experiments provide initial evidence of ideological differences in dissonance avoidance. Future work would do well to determine whether such differences are specific to political issues or topics that are personally important. Implications for political behavior are discussed.

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Examining the Hostile Media Effect as an Intergroup Phenomenon: The Role of Ingroup Identification and Status

Tilo Hartmann & Martin Tanis
Journal of Communication, forthcoming

Abstract:
This approach conceptualizes the hostile media effect (HME) as an intergroup phenomenon. Two empirical studies, one quasi-experimental and one experimental, examine the HME in the context of the abortion debate. Both studies show that ingroup identification and group status qualify the HME. Pro-choice and pro-life group members perceived an identical newspaper article as biased against their own viewpoint only if they considered their ingroup to have a lower status in society than the outgroup. In addition, only group members with a stronger ingroup identification showed a HME, particularly because of self-investment components of ingroup identification. Taken together, the findings confirm the important influence of ingroup status and ingroup identification on the HME.

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The Effects of Beneficiary Targeting on Public Support for Social Policies

Eric Lawrence, Robert Stoker & Harold Wolman
Policy Studies Journal, May 2013, Pages 199-216

Abstract:
We assess the tendency for the public to use group-centric policy evaluations with evidence from a survey experiment concerning two issues within the social policy domain, health care and aid to cities. By randomly varying target group identity within each issue and using both negatively and positively regarded groups our evidence shows that differences exist in the tendency for members of the public to use group-centric heuristics. Group-centric evaluations are related to party identification and political ideology. Across both issues conservatives and Republicans are more likely than liberals or Democrats to adopt a group-centric heuristic. Partisan and ideological differences suggest that established theories miss the mark by emphasizing how universal policy designs are preferred to designs that target unpopular groups.

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Gresham's Law of Political Communication: How Citizens Respond to Conflicting Information

Cheryl Boudreau
Political Communication, Spring 2013, Pages 193-212

Abstract:
Although citizens are often exposed to conflicting communications from political elites, few studies examine the effects of conflicting information on the quality of citizens' decisions. Thus, I conduct experiments in which subjects are exposed to conflicting information before making decisions that affect their future welfare. The results suggest that a version of Gresham's Law operates in the context of political communication. When a credible source of information suggests the welfare-improving choice and a less credible source simultaneously suggests a choice that will make subjects worse off, subjects make worse decisions than when only the credible source is available. This occurs because many subjects base their decisions upon the less credible source or forgo participation. This occurs mostly among unsophisticated subjects, who are more easily led astray. These findings reveal important limits to the effectiveness of credible information sources and suggest how political campaigns might strategically use conflicting information to their benefit.

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Compulsory voting and the dynamics of partisan identification

Shane Singh & Judd Thornton
European Journal of Political Research, March 2013, Pages 188-211

Abstract:
Compulsory rules are known to have far-reaching effects beyond boosting electoral participation rates. This article examines the relationship between compulsory voting and partisan attachments. A theory of attachment formation and strength is engaged that argues that compulsory voting boosts the likelihood that one will identify with a party and, in turn, the strength of party attachments among identifiers. The statistical model accounts for both the hierarchical structure of the data (individuals in elections) and the dual nature of the dependent variable (individuals report a strength of attachment only for the party with which they identify). Using data from the Comparative Study of Electoral Systems, it is demonstrated that compulsory voting does indeed increase both the incidence and the strength of partisanship.

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Endogenous institutions and political extremism

Alexander Wolitzky
Games and Economic Behavior, September 2013, Pages 86-100

Abstract:
The election of extreme political leaders is often associated with changes in political institutions. This paper studies these phenomena through a model in which the median voter elects a leader anticipating that he will impose institutional constraints - such as constitutional amendments, judicial appointments, or the implicit threat of a coup - that influence the behavior of future political challengers. It is typically optimal for the median voter to elect an extreme incumbent when democracy is less fully consolidated, when the costs of imposing institutional constraints are intermediate, and when the distribution of potential challengers is asymmetric. The median voter typically elects a more right-wing incumbent when the distribution of potential challengers shifts to the left. Implications of the model for the consolidation of democracy and institutional constraints are discussed, as are several related mechanisms through which politicians? ability to affect institutions may lead voters to optimally elect extremists.

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Jointly They Edit: Examining the Impact of Community Identification on Political Interaction in Wikipedia

Jessica Neff et al.
PLoS ONE, April 2013

Background: In their 2005 study, Adamic and Glance coined the memorable phrase 'divided they blog', referring to a trend of cyberbalkanization in the political blogosphere, with liberal and conservative blogs tending to link to other blogs with a similar political slant, and not to one another. As political discussion and activity increasingly moves online, the power of framing political discourses is shifting from mass media to social media.

Methodology/Principal Findings: Continued examination of political interactions online is critical, and we extend this line of research by examining the activities of political users within the Wikipedia community. First, we examined how users in Wikipedia choose to display their political affiliation. Next, we analyzed the patterns of cross-party interaction and community participation among those users proclaiming a political affiliation. In contrast to previous analyses of other social media, we did not find strong trends indicating a preference to interact with members of the same political party within the Wikipedia community.

Conclusions/Significance: Our results indicate that users who proclaim their political affiliation within the community tend to proclaim their identity as a 'Wikipedian' even more loudly. It seems that the shared identity of 'being Wikipedian' may be strong enough to triumph over other potentially divisive facets of personal identity, such as political affiliation.

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Aged Communities and Political Knowledge

Brittany Bramlett
American Politics Research, forthcoming

Abstract:
Past work emphasizes the decline of cognition into older age. Recent work suggests that living in an aged community provides ample opportunity for social interaction with peers and that these older residents perform better cognitively than more isolated seniors. I test whether this relationship is evident for the political cognition of older residents with NAES data from 2000 and 2004. Findings indicate higher levels of political knowledge among seniors living in aged communities compared with their peers living in places without the same social context.

By KEVIN LEWIS | 09:00:00 AM


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