New IZA DPs -- Methods & Models

[IZA Publications]

Dear Italo Gutierrez,

These new IZA Discussion Papers are now available online.

DP 18299 - Stark:
In Search of Neural Correlates of Social Comparisons: An Integrative Research Design
DP 18309 - Arcidiacono/Gyetvai/Maurel/Jardim:
Identification and Estimation of Continuous-Time Job Search Models with Preference Shocks
DP 18313 - Böckerman/Jysmä/Kanninen:
Difference-in-Kinks Design
DP 18315 - Belzil/Jagelka:
Separating Preferences from Endogenous Effort and Cognitive Noise in Observed Decisions

Please find the abstracts and download links below.

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IZA DP No. 18299

Oded Stark:

In Search of Neural Correlates of Social Comparisons: An Integrative Research Design

Abstract:
We review the research questions that guided studies seeking to detect brain activity arising from engagement in upward social comparisons, in particular comparisons of a relative variable of interest and a variable-based rank. To streamline, and without loss of generality, we refer throughout this paper to income as the comparison variable. For close scrutiny, we choose two representative and influential studies, Fliessbach et al. (2007) and Zink et al. (2008). Each of these studies is representative of a family of studies conducted in the same vein, and each examined in isolation neural correlates, either of income-based relative deprivation, in short relative deprivation, or of income-based rank. We argue that a deeper research question than those to which the Fliessbach et al. and Zink et al. studies attended pertains to the interaction and tradeoffs between relative deprivation and income-based rank and, consequently, to the corresponding activity in areas of the brain. We propose a method for formulating an improved, integrative research design, and we remark on the expected corresponding gain.

https://docs.iza.org/dp18299.pdf

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IZA DP No. 18309

Peter Arcidiacono, Attila Gyetvai, Arnaud Maurel, Ekaterina Jardim:

Identification and Estimation of Continuous-Time Job Search Models with Preference Shocks

Abstract:
This paper applies some of the key insights of dynamic discrete choice models to continuous-time job search models. Our framework incorporates preference shocks into search models, resulting in a tight connection between value functions and conditional choice probabilities. In this environment, we establish constructive identification of the model parameters, including the wage offer distributions off- and on-the-job. Our framework makes it possible to estimate nonstationary search models in a simple and tractable way, without having to solve any differential equations. We apply our method using Hungarian administrative data. Longer unemployment durations are associated with lower offer arrival rates, resulting in accepted wages falling over time. Counterfactual simulations indicate that increasing unemployment benefits by 90 days results in a 14-day increase in expected unemployment duration.

https://docs.iza.org/dp18309.pdf

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IZA DP No. 18313

Petri Böckerman, Sami Jysmä, Ohto Kanninen:

Difference-in-Kinks Design

Abstract:
This paper introduces the Difference-in-Kinks (DiK) design, an econometric framework that extends the standard regression kink design to settings in which the slope of a policy rule varies over time. By combining the key features of the regression kink and difference-in-differences approaches, the DiK design identifies causal effects from variation in kink intensity over time. We formalize both sharp and fuzzy versions of the estimator and derive the identification conditions under a parallel-trends assumption. Applying DiK to Finland’s 2011 guarantee pension reform demonstrates that changes in marginal incentives significantly increased the probability of retirement, while the standard regression kink design would have obtained implausibly large estimates in the opposite direction. The DiK design thus offers a flexible framework for policy evaluation in dynamic, nonlinear environments.

https://docs.iza.org/dp18313.pdf

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IZA DP No. 18315

Christian Belzil, Tomáš Jagelka:

Separating Preferences from Endogenous Effort and Cognitive Noise in Observed Decisions

Abstract:
We develop a micro-founded framework to account for individuals' effort and cognitive noise which confound estimates of preferences based on observed behavior. Using a large-scale experimental dataset we find that observed decision noise responds to the costs and benefits of exerting effort on individual choice tasks as predicted by our model. We estimate that failure to properly account for decision errors due to (rational) inattention on a more complex, but commonly used, task design biases estimates of risk aversion by 50% for the median individual. Effort propensities recovered from preference elicitation tasks generalize to other settings and predict performance on an OECD-sponsored achievement test used to make international comparisons. Furthermore, accounting for endogenous effort allows us to empirically reconcile competing models of discrete choice.

https://docs.iza.org/dp18315.pdf

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[IZA Publications]