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A01: Origin, malleability and consequences of risk, time and social preferences

We investigate the origin, malleability and consequences of risk, time and social preferences.
We study mechanisms through which these preferences are formed during childhood and adolescence and evolve subsequently over the life course. We also explore roots of country-level variation in preferences, examining geographic and cultural correlates as well as potentially endogenous factors (e.g., formal institutions, religion).
Furthermore, we assess the consequences of preferences on important life outcomes, both at the individual and at the aggregate level. The research is mainly empirical in nature. We collect and analyze experimental data and survey data, as well as combinations thereof. Important data sources are the Global Preference Survey (GPS), the Bonn Intervention Panel (BIP), and the German Socio-Economic Panel (SOEP).

 

Project members


Discussion papers (A01)

 

Motivation

Preferences and personality affect important life outcomes and are key drivers of human behavior in economic theories. Knowledge about the sources and determinants of preference heterogeneity at the individual level is limited. Understanding how preferences are formed during childhood and adolescence and identifying causal factors in the preference formation process is key to inform policy. Little is known about the roots of between-country heterogeneity in preferences,about the persistence of cross-cultural differences in preferences and about the role of differences in preference endowments for heterogeneity in outcomes.

Policy relevance

Insights into the degree and the origins of heterogeneity in personality, character traits and preferences can lead to improved institutional design. Understanding how family and education policies influence the formation of preferences is crucial to comprehending differences in individual decision-making and life success. Identifying the causal effects of institutions, the social and the economic environment on preference formation helps to develop effective, evidence-based policies. Research on the cultural component of preferences and its persistence also provides new insights for the design of integration policies.

Project plan

Work package 1 - Understanding deep and proximate determinants of preferences

  • We study the roots of differences in preference endowments between populations identified in the GPS.
  • We consider proximate and potentially endogenous factors (e.g., formal institutions, the political system, family structure, or religion), factors rooted in long-term history (e.g., ancient migration patterns) and antecedents such as climate or geography.
  • We investigate how these factors have shaped preferences over long time horizons.
  • We assess the degree of persistence of cross-cultural differences.
  • In our research on the cultural component of preferences and its persistence, we take on the challenge of finding valid instruments (e.g., for institutions, religion, or conflict).

Work package 2 - Preference formation and evolvement over the life course

  • We identify sources of individual differences in risk, time and social preferences and study mechanisms through which preferences form during childhood and adolescence and evolve over one's life span.
  • We consider the role of the family, the impact of the social environment and, specifically, the interaction with peers.
  • Using data from the BIP, we explore the co-evolution of preferences, beliefs and skills in multiple dimensions over the life span of children.
  • Building on theory, we study empirically the role of parenting style on preference formation in childhood, using data from the Stockholm Birth Cohort (SBC).
  • Using data from the SOEP, we investigate the malleability of risk preferences over the life span.

Work package 3 - Understanding the impact of preferences on outcomes

  • We assess the nature of relationships between preferences and aggregate outcomes identified in Falk et al. (2015).
  • We investigate whether differences in preference endowments between countries can explain differences in these outcomes (e.g., income, growth, conflicts).
  • At the individual level, we examine the effect of preferences and personality on life outcomes (e.g., education, health and labor market outcomes).
  • We investigate whether social mobility can be promoted by investing in personality and preferences that are conducive to success in life.

Experiments conducted by A01 members:

 
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