Stefan Legge

Do Professionals Get It Right? Limited Attention and Risk‐taking Behaviour

Does information processing affect individual risk-taking behavior? In this paper, we provide evidence that professional athletes suffer from a left-digit bias when dealing with signals about differences in performance. Using data from the highly competitive field of World Cup alpine skiing for the period of 1992-2014, we show that athletes misinterpret actual differences in race times by focusing on the leftmost digit, resulting in increased risk-taking behavior. For the estimation of causal effects, we exploit the fact that tiny time differences can be attributed to random shocks. We link our findings to prior research in psychology and economics, suggesting that different ways of information processing can explain our results. In contrast to recent studies in the field of behavioral economics, we then argue that high stakes and individual experience can magnify behavioral biases.

Trading off Welfare and Immigration in Europe

In this paper, we explore the trade-off Europe faces when choosing between immigration from poor countries and welfare spending. Using data from the European Social Survey on sixteen countries from 2002-2012, we document that voter preferences shifted in favor of redistribution but polarized over low-skill immigration. Notably, there is a sharp increase in the share of individuals supporting the welfare state but heavily opposing immigration. In order to provide an economic explanation for these phenomena, we present a model where support for both immigration and redistributive policies are potentially motivated by altruism. Using this model, we show how rising unemployment rates, shares of foreign-born citizens and aggregate education can explain observed shifts in policy preferences.

Rankings, Success, and Individual Performance: Evidence from a Natural Experiment

Rankings have become increasingly important over the past decades and impose a sharp distinction between success and failure. In this paper we examine the effects of ranking positions and great successes on individual performance by using a rich set of data on World Cup alpine ski races for the period of 1992--2013. We apply a regression discontinuity design and exploit close races as a source of quasi-randomized treatment assignment. Our results suggest substantial short-run effects of podium finishes on performance, especially for racers in the middle of the skill distribution. However, the effects are short-lived and mostly driven by individuals who miss prestigious ranks by a tiny margin. This finding highlights a potential drawback of rankings which has been neglected in previous research. We identify media attention as the key channel for performance effects and provide novel empirical evidence for an increasing media bias in favor of top-ranked competitors in the last two decades.