Luca Corazzini

Do Danes and Italians Rate Life Satisfaction in the Same Way? Using Vignettes to Correct for Individual-Specific Scale Biases†

Self-reported life satisfaction is highly heterogeneous across similar countries. We show that this phenomenon can by largely explained by the fact that individuals adopt different scales and benchmarks in evaluating themselves. Using a cross sectional dataset on individuals aged 50 and over in ten European countries, we compare estimates from an Ordered Probit in which life satisfaction scales are invariant across respondents with those from a Hopit model in which vignettes are used to correct for individual-specific scale biases. We find that variations in response scales explain a large part of the differences found in raw data. Moreover, the cross countries ranking in life satisfaction dramatically depends on scale biases.

Age, Health and Life Satisfaction Among Older Europeans

In this paper we investigate how age affects the self-reported level of life satisfaction among the elderly in Europe. By using a vignette approach, we find evidence that age influences life satisfaction through two counterbalancing channels. On the one hand, controlling for the effects of all other variables, the own perceived level of life satisfaction increases with age. On the other hand, given the same true level of life satisfaction, older respondents are more likely to rank themselves as “dissatisfied” with their life than younger individuals. Detrimental health conditions and physical limitations play a crucial role in explaining scale biases in the reporting style of older individuals.

Measuring the Behavioral Component of Financial Fluctuations: An Analysis Based on the S&P 500

We study the evolution of the behavioral component of the financial market by estimating a Bayesian mixture model in which two types of investors coexist: one rational, with standard subjective expected utility theory (SEUT) preferences, and one behavioral, endowed with an S-shaped utility function. We perform our analysis by using monthly data on the constituents of the S&P 500 index from January 1962 to April 2012. We assume that agents take investment decisions by ranking the alternative assets according to their performance measures. A tuning parameter blending the rational and the behavioral choices can be estimated by using a criterion function. The estimated parameter can be interpreted as an endogenous market sentiment index. This is confirmed by a number of checks controlling for the correlation of our endogenous index with measures of (implied) financial volatility, market sentiments and financial stress. Our results confirm the existence of a significant behavioral component that reaches its peaks during periods of recession. Moreover, after controlling for a number of covariates, we observe a significant correlation between the estimated behavioral component and the S&P 500 return index.

Are Taxes Beautiful? A Survey Experiment on Information, Tax Choice and Perceived Adequacy of the Tax Burden

We report results from a survey experiment aimed at testing whether providing information on the national public expenditure to the taxpayers and whether involving them in the process of allocating tax revenues over public goods influence the level of the adequate tax rate - the fraction of income that individuals consider adequate to pay as taxes. We find that providing information on public expenditure does not influence the level of the adequate tax rate. On the contrary, the level of the adequate tax rate substantially increases when taxpayers can get to choose the public goods to finance through their taxation.

Economic Behavior Under Alcohol Influence: An Experiment on Time, Risk, and Social Preferences

We report results from an incentivized laboratory experiment to provide controlled evidence on the causal effects of alcohol consumption on risk preferences, time perception and altruism. Our design allows disentangling the pharmacological effects of alcohol intoxication from those mediated by expectations, as we compare behaviors of three groups of subjects: those participating to an experiment with no reference to alcohol, those exposed to the possibility of consuming alcohol but assigned to a placebo and those having effectively consumed alcohol. Once randomly assigned to one treatment, subjects were administered a series of consecutive economic tasks, being the sequence kept constant across treatments. After controlling for both the willingness to pay and the potential misperception of probabilities as elicited in the experiment, we do not detect any effect of alcohol in depleting subjects’ risk tolerance. On the contrary, we find that alcohol intoxication increases impatience. Moreover, we find that alcohol makes subjects less generous as we detect a negative relationship between the blood alcohol concentration and the amount of money donated to NGOs.

Economic behavior under the influence of alcohol: an experiment on time preferences, risk-taking, and altruism

We report results from an incentivized laboratory experiment undertaken with the purpose of providing controlled evidence on the causal effects of alcohol consumption on risk-taking, time preferences and altruism. Our design disentangles the pharmacological effects of alcohol intoxication from those mediated by expectations, as we compare the behavior of three groups of subjects: those who participated in an experiment with no reference to alcohol, those who were exposed to the possibility of consuming alcohol but were given a placebo and those who effectively consumed alcohol. All subjects participated in a series of economic tasks administered in the same sequence across treatments. After controlling for both the willingness to pay for an object and the potential misperception of probabilities as elicited in the experiment, we detect no effect of alcohol in depleting subjects’ risk tolerance. However, we find that alcohol intoxication increases impatience and makes subjects less altruistic.

Risk Aversion, Overconfidence and Private Information as Determinants of Majority Thresholds

We present and experimentally test a theoretical model of majority threshold determination as a function of voters’ risk preferences. The experimental results confirm the theoretical prediction of a positive correlation between the voters risk aversion and the corresponding preferred majority threshold. Furthermore, the experimental results show that a voters preferred majority threshold negatively relates to the voters confidence about how others will vote. Moreover, in a treatment in which individuals receive a private signal about others’ voting behaviour, the confidence-related motivation of behaviour loses ground to the signals strength.

Too Many Charities? Insight from an Experiment with Multiple Public Goods and Contribution Thresholds

We present results from an experiment with multiple public goods, where each good produces benefits only if total contributions to it reach a minimum threshold. The experiment allows us to compare contributions in a benchmark treatment with a single public good and in treatments with more public goods than can be funded. The presence of multiple public goods makes coordination among participants more difficult, discouraging contributions, and decreasing the likelihood of any public good being effectively funded. Multiplicity decreases funding unless one public good stands out as being the most efficient alternative. Applied to the case of philanthropy, the results show how overall donations and the number of effectively funded charities may both decrease as the total number of charities increase. This is true even if the new charities offer higher potential benefits than previous options.

Preference for Efficiency or Confusion? A Note on a Boundedly Rational Equilibrium Approach to Individual Contributions in a Public Good Game

By using data from a voluntary contribution mechanism experiment with heterogeneous endowments and asymmetric information, we estimate a quantal response equilibrium (QRE) model to assess the relative importance of efficiency concerns versus noise in accounting for subjects overcontribution in public good games. In the benchmark specification, homogeneous agents, overcontribution is mainly explained by error and noise in behavior. Results change when we consider a more general QRE specification with cross-subject heterogeneity in concerns for (group) efficiency. In this case, we find that the majority of the subjects make contributions that are compatible with the hypothesis of preference for (group) efficiency. A likelihood-ratio test confirms the superiority of the more general specification of the QRE model over alternative specifications.

Does Paternal Unemployment Affect Young Adult Offspring’s Personality?

Using longitudinal data from the German Socio-Economic Panel (SOEP), we analyze the impact of paternal unemployment on the “big five” personality traits of young adult offspring aged 17–25. Results from longitudinal value-added models for personality show that paternal unemployment makes offspring significantly more conscientious and—to a smaller extent—less neurotic. The uncovered effects are robust to the presence of selection on unobservables and correlation between the error term and the lagged outcome. We also discuss heterogeneous effects and the potential mechanisms behind our findings.