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

In this project, we study the determinants and consequences of economic beliefs and preferences. We rely on self-collected experimental and survey data, as well as data from the Bonn Intervention Panel (BIP). Our project builds on and connects several strands of literature ranging from different branches of economics to cognitive and developmental psychology.

One focus of this proposal will be child development and the question of how the social environment shapes people’s personalities and preferences and entrenches social inequalities. A key challenge that has plagued the related literature is that causality is difficult to establish. Using data from the Bonn Intervention Panel, we are able to shed light on the direction of causality through experimental variation. We focus on preferences for honesty and willingness to compete and investigate how such preferences develop during childhood and how they are molded by the social environment in which children grow up. Moving beyond preferences, we will also consider one of the arguably most important outcomes in life: happiness. Causal determinants of subjective well-being have been notoriously difficult to establish. We will document the evolution of happiness from childhood through adolescence to adulthood and isolate the causal role of the social environment as a potential determinant of happiness.

A new focus in the second funding period will be on the roots and consequences of individual beliefs about skills and preferences. Knowledge about oneself is crucial in myriads of decisions, ranging from career choices to decisions that involve the prediction of future choices such as the demand for commitment devices. Despite their obvious importance, we know next to nothing about the determinants of beliefs about own skills and preferences. Using data from controlled lab experiments as well as the BIP, we aim to study these determinants with a focus on the role of the social environment and psychological factors.