Winter 21/22
A firm-side perspective on parental leave
Abstract: Motherhood and parental leave interrupt employment relationships, likely imposing costs on firms. We document that mothers who are difficult to replace internally take shorter leave and that their firms hire replacements more often. Introducing more generous parental leave benefits erases the link between mothers’ internal replaceability and their leave duration. In firms with few internal substitutes this reduces employment in the short-, but not longer-term. Firms respond by hiring fewer women of childbearing age into occupations where they are difficult to replace internally. Taken together, motherhood and generous parental leave policies burden firms that have few internal substitutes available.
On-site presentation (Online live-stream)
Overconfidence and the Political and Financial Behavior of a Representative Sample
We study the relationship between overconfidence and the political and financial behavior of a nationally representative sample. To do so, we introduce a new method of eliciting overconfidence that is simple to understand, quick to implement, and captures respondents' excess confidence in their own judgment. Our results show that, in line with theoretical predictions, an excessive degree of confidence in one's judgment is correlated with lower portfolio diversification, larger stock price forecasting errors, and more extreme political views. Additionally, we find that overconfidence is correlated with voting absenteeism. These results appear to validate our method and show how overconfidence is a bias that permeates several aspects of peoples' life.
On-site presentation (Online live-stream)
Predictability of Bull and Bear Markets: A New Look at Forecasting Stock Market Regimes (and Returns) in the US
Abstract: The empirical literature of stock market predictability mainly suffers from model uncertainty and parameter instability. To meet this challenge, we propose a novel approach that combines dimensionality reduction, regime-switching models, and forecast combination to predict the S&P 500. First, we aggregate the weekly information of 146 popular macroeconomic and financial variables using different principal component analysis techniques. Second, we estimate one-step Markov-switching models with time-varying transition probabilities using the principal components as predictors. Third, we pool the models in forecast clusters to hedge against model risk and to evaluate the usefulness of different specifications. Our weekly forecasts respond to regime changes in a timely manner to participate in recoveries or to prevent losses. This is also reflected in an improvement of risk-adjusted performance measures as compared to several benchmarks. However, when considering stock market returns, our forecasts do not outperform common benchmarks. Nevertheless, these add statistical and, in particular, economic value during recessions or in declining markets.
On-site presentation (Online live-stream)
Deterrence or Backlash: The Causal Effect of Arrest on the Dynamics of Domestic Violence
Domestic violence is ubiquitous, with millions of women worldwide being repeatedly victimized by their intimate partners. So how should police officers respond to domestic violence incidents in order to maximize the likelihood that battered women will not be victimized again? We develop and apply a novel instrumental variable strategy to explore how arresting batterers is linked to repeat domestic violence. Drawing upon unique and extremely detailed administrative data on hundreds of thousands domestic violence incidents recorded by a major police force in Great Britain, we exploit (i) that the availability and geographical location of patrol officers to assign to respond to an domestic violence incident is "as good as random", and (ii) that patrol officers differ systematically in their propensity to arrest suspected batters. We find that arrest can break cycles of domestic violence, decreasing the probability that victims are revictimized within 12 months by 31 percentage points. Exploiting domestic violence calls initiated by third parties rather than victims, we provide evidence indicating that reductions in domestic violence reporting do not drive the arrest effect. To explain why arrest deters repeat domestic violence, we demonstrate that it paths the way to immediate criminal sanctions against suspected batterers: it increases the likelihood a suspect batterer faces a criminal investigation, is retained in custody during the investigation, and is charged with a crime. In stark contrast to recent calls for a decriminalization of domestic violence, our results suggest that the optimal police response to domestic violence involves a low threshold of tolerance towards batterers.
Online presentation
Herd Behavior of Refugees
Residents of civil war countries must decide whether to stay or flee, often without reliable information about costs and benefits of fleeing. Using original survey data on Syrian refugees, I present evidence that residents solve this information problem by imitating the emigration decision of other residents. However, if everybody imitates others and nobody knows the true costs and benefits of fleeing, then there is a substantial chance that many make the wrong decision. The right decision, for example, is to flee when staying means death. Empirically, however, I find no relationship between survey respondents’ propensity to flee and objective measures of death risk in their origin location in Syria, which perhaps indicates that people make wrong emigration decisions. My findings suggest a new form of humanitarian aid in conflict zones: the distribution of information
On-site presentation (Online live-stream)
Fearless Woman: Financial Literacy and Stock Market Participation
Women are less financially literate than men. It is unclear whether this gap reflects a lack of knowledge or, rather, a lack of confidence. Our survey experiment shows that women tend to disproportionately respond “do not know” to questions measuring financial knowledge, but when this response option is unavailable, they often choose the correct answer. We estimate a latent class model and predict the probability that respondents truly know the correct answers. We find that about one-third of the financial literacy gender gap can be explained by women’s lower confidence levels. Both financial knowledge and confidence explain stock market participation.
Online presentation.
COVID-19 and pro-sociality: How do donors respond to local pandemic severity, increased salience, and media coverage?
Has the COVID-19 pandemic affected pro-sociality among individuals? After the onset of the pandemic, many charitable appeals were updated to include a reference to COVID-19. Did donors increase their giving in response to such changes? In order to answer these questions, we conducted a real-donation online experiment with more than 4,200 participants from 149 local areas in England and over 21 weeks. First, we varied the fundraising appeal to either include or exclude a reference to COVID-19. We found that including the reference to COVID-19 in the appeal increased donations. Second, in a natural experiment like approach, we studied how the relative local severity of the pandemic and media coverage about local COVID-19 severity affected giving in our experiment. We found that both higher local severity and more related articles increased giving of participants in the respective areas. This holds for different specifications, including specifications with location fixed effects, time fixed effects, a broad set of individual characteristics to account for a potentially changing composition of the sample over time and to account for health- and work-related experiences with and expectations regarding the pandemic. While negative experiences with COVID-19 correlate negatively with giving, both approaches led us to conclude that the pure effect of in creased salience of the pandemic on pro-sociality is positive
On-site presentation (Online live-stream)
Firms’ Tax (Burden) Misperception
Abstract: Tax perceptions are well-known to determine the economic behavior of individuals. While there is broad evidence on significant tax-related misperceptions, however, little is known on firms’ tax-related misperception. We quantify firms’ tax-related misperception using survey data of 657 German firms. Further, we identify drivers of firms’ tax-related misperception. Our results indicate that firms considerably misperceive their average tax rate (ATR) and marginal tax rate (MTR). Respondents from all kinds of firms such as sole proprietorships, partnerships, and corporations overestimate their ATR, however, corporations to a significantly lower extent. By contrast, our findings on MTRs are inconclusive. Surprisingly, comparing firms’ perception of ATRs with MTRs reveals a missing understanding of basic tax concepts. According to our results, size, legal form, and estimates of tax complexity and tax compliance cost are the main drivers of tax burden misperception.
Online presentation
Wellbeing and Religious Behaviour During and After Natural Disasters
Abstract: As the severity and frequency of natural disasters become more pronounced with climate change and the increased habitation of at-risk areas, it is important to understand how people react to them. This presentation combines two papers on that general topic. We look at natural disasters in the US in a sample of 2.2 million observations, allowing for individual- and county-level factors. The event-study design contrasts changes in outcomes in counties affected by disasters with that of residents in unaffected counties of the same state. In the first paper we look at psychological resilience during and after disasters, measured by changes in hedonic wellbeing. We find that people’s hedonic wellbeing is reduced by approximately 6% of a standard deviation in the first two weeks following the event, with the effect diminishing rapidly thereafter. The negative effects are driven by White, older, and economically advantaged sub-populations, who exhibit less resilience. We find no evidence that existing indices of community resilience moderate impacts. In the second paper we look at religious observances during natural disasters and afterwards. We find that individuals reduce the time spent on prayer during disasters and then rapidly return to baseline, with no indication of sustained changes.
Online presentation.
The toll of voting in a pandemic? Municipal elections and the spread of COVID-19 in Bavaria
Abstract: This study investigates whether the municipal elections that were held on March 15, 2020 in Bavaria – shortly after the WHO declared COVID-19 a global pandemic– contributed to the spread of COVID-19 cases and COVID-related deaths in this German state. Constructing synthetic controls for each of Bavaria’s 96 districts based on the other German districts, we find that about 86 per 100,000 – over a third of the increase in positive test results between March 15 and April 4 in Bavaria – cannot be explained by district-level demographic, economic, health or child care characteristics, nor by the distance to Ischgl, a proxy for skiing tourism that was largely responsible for the first wave of COVID in Germany. Furthermore, within Bavaria, districts with higher voter participation had a higher increase in COVID-19 cases and deaths after the election, even when holding other drivers of the spread of the virus, such as distance to Ischgl and strong-beer festivals constant. Our results are highly robust and suggest that elections can be spreaders of infectious diseases. They call for future research to investigate the role of elections in spreading infectious diseases.
Online presentation
Jan Marcus (Universität Hamburg)
Does schooling affect longevity? Evidence from school entry cut-offs
Abstract: We use school entry cut-off rules to study the effects of schooling on mortality in Germany. Based on the 1970 Census and the full Cause-of-Death Statistics for Germany, we exploit information on the exact date of birth within a regression discontinuity framework. Individuals born just after the school entry cut-off are older when they enter school, and they are three percentage points more likely to earn a higher secondary school leaving certificate. In later life, those individuals born after the school entry cut-off are significantly less likely to die before age 70. Studying the causes of death, we find that the reduced mortality risk is mainly driven by fewer deaths associated with unhealthy behaviours over the life course.