Ofer Azar (Ben-Gurion University) - Relative thinking in mixed compensation schemes: Some experimental evidence
December 21, 2023
Studies show that people exhibit relative thinking: they are affected by relative price
differences even when these are irrelevant. The evidence is based on hypothetical-scenario
experiments in consumer-behavior contexts. A previous attempt to show relative thinking in the
context of mixed compensation schemes (which include a fixed payment and a pay-for-performance
payment) failed to document relative thinking (Azar, 2019). We replicate the main features of this
study, but now do find evidence for relative thinking. Subjects are offered to do real-effort tasks of
finding letters on pages and all of them are paid the same amount for every correct answer.
However, there are two versions that differ in the fixed payment that is added. Effort is lower when
the fixed payment is higher. This is explained by relative thinking: the higher fixed payment makes
the per-task payment seem smaller compared to it, and therefore results in less effort. This finding
has important implications because mixed compensation schemes are prevalent in many jobs, and
are also a common feature of experiments (a fixed show-up fee and a payment that depends on
performance). We also find some connection between the behavior in the experiment and the
decision-making style of the subjects (measured on scales of intuitive, rational, and spontaneous).
Subjects with more spontaneous decision-making style make less effort in the experiment. Subjects
with more intuitive decision-making style are less affected by relative thinking. Our study offers
the first demonstration of relative thinking in the context of mixed compensation schemes.
Nikolaos Georgantzís (Burgundy School of Business) - Risk aversion and the value of risky assets. The role of knowledge
November 17, 2023
We report results on an experiment with incentive-compatible valuations of old wines aging under suboptimal conditions. We confirm that subjects' risk aversion has a negative impact on "risky wine" valuations. However, accounting for individual self-reported and objective (WSET level) knowledge shows that the link between risk aversion and risky wine valuations is only present in the absence of knowledge. Conclusions about the value of knowledge for buyers and sellers have interesting entrepreneurial implications.
Vincenzo Prete (University of Palermo) - Optimal Non-Welfarist Income Taxation for Inequality and Bi-Polarization Reduction
November 7, 18.15-19.15, Room 1D (VI floor)
We adopt a non-welfarist approach to investigate the effect of different redistributive objectives on the shape of the optimal tax schedule. We consider
inequality and income polarization reduction objectives and we identify socially desirable three brackets piecewise linear tax systems that allow to collect
a given revenue.
The optimal tax problem is formalized as the maximization of families of
rank-dependent social evaluation function defined over net incomes. These
functions allow to incorporate within the same social evaluation model concerns
for inequality and for polarization reduction.
Both with fixed and variable labour supply the optimal tax schemes substantially differ as the focus moves from the reduction of inequality to the one
of polarization. In the case of inequality concerns the optimal tax system is
mainly convex exhibiting increasing marginal tax rates unless when labour supply elasticities are higher. While in case of polarization concerns the optimal
tax scheme is non-convex with reduced marginal tax rate for the upper income
Anthony Lepinteur (University of Luxembourg) - Job insecurity and Precautionary Savings: An Italian Natural Experiment
November 3 2023, 13.00-14.00, Aula del Consiglio (VI floor)
Job insecurity has wide-ranging effects beyond the labour market. Using the 2012 Fornero reform in Italy as a natural experiment and employing difference-in-differences regressions with a firm-size discontinuity, we analyse individual-level data from the Italian Survey on Household Income and Wealth and Longitudinal Labour Force Survey. Our findings reveal that greater job insecurity leads to increased savings. Through a series of tests, we establish that this rise in savings is driven by precautionary motives. Our results indicate an elasticity of savings to employment risk of 9% and a risk aversion level of three. Moreover, we observe that workers facing greater job insecurity protect themselves by reducing exposure to financial risks.
Ana Suarez-Alvarez (University of Oviedo) - Internet Use and Wellbeing in Europe
October 24 2023, 18.15-19.15, Room 1D (VI floor)
The Internet's profound impact on society, communication, and the global economy is
undeniable. Despite the studies on Internet adoption and frequency of use, little attention has been given to the intensity of usage as measured by the time spent online. In highly developed countries like the European ones, bridging the access gap is nowadays less relevant, as almost everyone has Internet access. Instead, the focus should be on analysing usage intensity to uncover new digital disparities among different groups and understand potential impacts on individuals' subjective well-being (SWB).
This study aims to deeply examine Internet usage time, its socioeconomic determinants, and its effects on SWB using data from the European Social Survey (ESS) spanning from 2016 to 2020-22 in 21 European countries. We seek to answer two research questions: (1) How do individuals' characteristics influence Internet usage intensity? (2) What is the impact of Internet usage intensity on individuals' SWB? Our findings show inequalities in Internet usage time driven by individuals' socioeconomic and sociodemographic characteristics. Traditionally disadvantaged groups, both offline and online, exhibit lower Internet usage time, consistent with the existing literature on the digital divide. As for the effect of intensity of Internet use on SWB, after accounting for individuals' characteristics
and addressing Internet's endogeneity, we found a negative and significant relationship
between Internet usage intensity and life satisfaction, especially for the most intensive internet users.
Stefano Filauro (Bocconi University) - Incorporating Housing Costs, and their variation at local level, into EU Measures of Poverty: Advantages, Disadvantages, Assumptions, and Implications
July 19, 2023, 14.00-15.00, Aula Marrama
The largest expenditure for most households is housing costs, including rents, mortages, and utility bills. The median housing cost in the EU in 2020 amounted to around 13% of the median income, although this ratio can peak at over 30% in some countries (e.g. Greece). Moreover, housing costs vary extensively across regions, especially in countries with secular territorial disparities. Within the same country, the median housing cost in the highest-cost region can be as high as 200% larger compared to the lowest-cost region (in the case of Spain, the Madrid area as opposed to Extremadura). Housing costs also vary meaningfully across regions in Germany, Italy and France. Despite this, housing costs are not usually taken into account into official poverty measurements. However, recent analyses have shown to what extent relative poverty changes when housing costs are somehow factored in a concept of income, whether imputing rents for outright owners or substracting housing costs for all households (Raitano 2022, Tormahleto and Sauli 2017). The cross-country evidence points to a different country ranking in terms of relative poverty as homeownership in widely diffused in Southern-European countries, and this practice improves the overall poverty rates of these countries vis-à-vis Northern EU countries. In this study we take a different approach: we look at the traditional poverty lines, such as the 60% of national median income, and we test their effectiveness against revised poverty thresholds that take into account the within-country variation in housing costs. We discuss advantages, disadvantages, assumptions, and implications of incorporating local housing costs into EU poverty thresholds. We then evaluate whether such adjustments ‘improve’ poverty measures by reducing their mismatch against material deprivation and subjective poverty rates. We use EU-SILC data for all countries reporting housing costs, income dimensions and material deprivation at regional level (NUTS1 or NUTS2). As some housing variables, such as housing quality and type of housing, have been recorded for a sufficient number of countries only since 2010, our analysis focuses on the last decade.
Michela Chessa (Université Côte d'Azur) - An experimental Nash program
May 19 2023, 12:30 - 13:30, Aula Marrama
Bridging the gap between the strategic and cooperative approaches is recognized as a fundamental issue of game theory. Attempted resolutions of this issue, well known as the Nash program (Nash, 1953), have provided many different strategic bargaining mechanisms that sustain the Shapley value at equilibrium. Such mechanisms fit and unify the two approaches, allowing the players who face an allocation problem to bargain in a restricted way, and to converge to a stable solution without the need for an intermediary.
We experimentally implement different well-known mechanisms inducing the Shapley value as an ex-ante equilibrium outcome of a noncooperative bargaining procedure. In particular, we focus on the comparison of the demand-based Winter’s demand commitment bargaining mechanism and the offer-based Hart and Mas-Colell procedure. Our results suggest that the offer-based Hart and Mas-Colell mechanism better induces players to cooperate and to agree on an efficient outcome, whereas the demand-based Winter mechanism better implements allocations that reflect players’ effective power, provided that the grand coalition is formed.
Patrick Llerena (Université de Strasbourg) - The Creativ’lab: why and first experiments
May 5, 2023, 12.00-13-00, Aula Marrama
We will present the newly implemented experimental lab conceived to observe collective processes ( decision processes, interactions, creative …). We will show results of first experiments in creativity economics. We will try to disentangle the role of diversity surface and deep-level variables on creative performance at the individual and group levels.
Angela Sutan (Burgundy School of Business) - The man who saw the (end of) the world: is AR a credible tool to enhance pro-environmental behavior?
April 13, 2023, 14.00-15.00, Aula Marrama
We run an experiment on recyclying and incineration decisions based on a public good game design, in which administrators in change of the incinerator can give feedback to participants on their provisional choices. To do so, they have access to AR or static technologies that allow them to visualize group decisions.
Silvia Coretti (Sapienza University of Rome) - Hardening subnational budget constraints via administrative subordination: The Italian experience of recovery plans in regional health services
Since 2007, Italian regions running large deficits underwent recovery plans (Piani di Rientro) imposed by the central government. The goal was twofold: regions were asked (i) to restore a balanced budget and (ii) to continue supply the set of services defined by the constitution. We investigate whether recovery plans have reached their objectives. Our evidence suggests that recovery plans have proved to be an effective mechanism to eliminate subnational governments deficits. We also do not find any significant effects on health care utilization and on citizens' health. Overall, spending efficiency has likely improved.
Vito Peragine (University of Bari) - International migration and income inequality
In this paper we explore the links between international migration and income inequality. After presenting a simple model which considers the role of income distribution in individual decisions to migrate, we estimate a set of models on the determinants of yearly bilateral migration from a very large pool of countries in the period 1960–2019. The empirical results confirm that inequality—in both origin and destination countries—significantly shapes individual choices about where, and whether, to migrate. We find that the effect of inequality at both ends of migration corridors is heterogeneous across countries at different levels of development, most likely due to differences in migration barriers and in the patterns of migrants’ self-selection. In the second part of the study, we explore the direct effect of international migration on global inequality, by assessing how the current level of migration in the world has likely affected income inequality between and within nations. By adopting a counterfactual methodology, we find that migration flows lead to lower between-country inequality and higher within-country inequality, compared with a scenario with no migration. The overall impact is a negligible reduction in global inequality. The impact of migration on inequality, although small, tends to increase over time.
Paolo Di Caro (MEF) - Size, heterogeneity and distributional effects of self-employment income tax evasion in Italy
We measure tax evasion in Italy by estimating a food expenditure equation that disentangles households with prevalent income from self-employment, which is self-declared, from those with mostly third-party reported income. By using a novel dataset that links the 2013 Italian Household Budget Survey with individual tax records over a period of 7 years, we reduce measurement error by a great extent. We also depart from the usual constant share of underreporting, showing that underreporting heterogeneity among self-employed is significant, and is larger for singles and for college-educated households. We show that self-employed workers in Italy exhibit a similar attitude to tax evasion as those in other developed countries. Therefore, we point to the structure of the economy for an explanation of why aggregate tax evasion in Italy is larger than in other developed countries. The estimated heterogeneity of underreporting behavior of households combined with the use of a tax-benefit microsimulation model have allowed us to shed light on the distributional effects of income tax evasion, showing that almost 73% of the missing revenue is attributable to tax-payers at the top of the income distribution.