@techreport{BartkeBosworthSnoweretal., type = {Working Paper}, author = {Bartke, Simon and Bosworth, Steven J. and Snower, Dennis and Chierchia, Gabriele}, title = {The Influence of Induced Care and Anger Motives on Behavior, Beliefs and Perceptions in a Public Goods Game}, pages = {35}, abstract = {This study analyzes the stability of preferences through the lens of psychological motives. We report the results of a public goods experiment in which subjects were induced with the motives of Care and Anger through autobiographical recall. Subjects' preferences, beliefs, and perceptions under each motive are compared with those of subjects experiencing a neutral autobiographical recall condition. We find that Care elicits significantly higher contributions than Anger, with Control treatment contributions in between. This is primarily driven by changes in conditional contribution schedules (measuring preferences) across treatments, though higher beliefs explain part of the effect that Care has on giving. These results are robust to checking for comprehension of the game's incentives. We also observe concomitant differences in attention to own and other's payoffs (using mouse tracking) as well as perceptions of the game's incentive structure (harmony) - particularly for subjects motivated by Anger. We interpret our findings as suggesting that people have access to multiple preferences that depend on how they perceive the decision context.}, language = {en} } @article{SnowerAhrensPirschel, author = {Snower, Dennis and Ahrens, Steffen and Pirschel, Inske}, title = {A Theory of Price Adjustment under Loss Aversion}, series = {Journal of Economic Behavior \& Organization}, volume = {134}, journal = {Journal of Economic Behavior \& Organization}, doi = {10.1016/j.jebo.2016.12.008}, pages = {78 -- 95}, abstract = {We present a new partial equilibrium theory of price adjustment, based on consumer loss aversion. In line with prospect theory, the consumers' perceived utility losses from price increases are weighted more heavily than the perceived utility gains from price decreases of equal magnitude. Price changes are evaluated relative to an endogenous reference price, which depends on the consumers' rational price expectations from the recent past. By implication, demand responses are more elastic for price increases than for price decreases and thus firms face a downward-sloping demand curve that is kinked at the consumers' reference price. Firms adjust their prices flexibly in response to variations in this demand curve, in the context of an otherwise standard dynamic neoclassical model of monopolistic competition. The resulting theory of price adjustment is starkly at variance with past theories. We find that - in line with the empirical evidence - prices are more sluggish upwards than downwards in response to temporary demand shocks, while they are more sluggish downwards than upwards in response to permanent demand shocks. The degree of these asymmetries, in turn, depends on the size of the shock.}, language = {en} } @techreport{SnowerBosworth, type = {Working Paper}, author = {Snower, Dennis and Bosworth, Steven J.}, title = {Identity-Driven Cooperation versus Competition}, pages = {8}, abstract = {This paper seeks to extend the domain of identity economics by exploring motivational foundations of in-group cooperation and out-group competition. On this basis, we explore the reflexive interaction between individual economic decisions and social identities in response to technological change in market economies. Our analysis explores how technological change falling on marketable goods and services, rather than non-market caring relationships, leads to a restructuring of identities, which increases the scope of individualism and promotes positional competition at the expense of caring activities. Since positional competition generates negative externalities while caring activities create positive ones, these developments have important welfare implications}, language = {en} } @article{SnowerAkerlof, author = {Snower, Dennis and Akerlof, George A.}, title = {Bread and Bullets}, series = {Elsevier Journal of Economic Behavior \& Organization}, volume = {126}, journal = {Elsevier Journal of Economic Behavior \& Organization}, number = {June 2016}, doi = {10.1016/j.jebo.2015.10.021}, pages = {58 -- 71}, abstract = {Standard economics omits the role of narratives (the stories that people tell themselves and others) when they make all kinds of decisions. Narratives play a role in understanding the environment; focusing attention; predicting events; motivating action; assigning social roles and identities; defining power relations; and establishing and conveying social norms. This paper describes the role narratives play in decision making, as it also juxtaposes this description against the backdrop of the Bolshevik-spawned narrative that played a critical role in the history of Russia and the Soviet Union in the 20th Century.}, language = {en} } @article{SnowerMerkl, author = {Snower, Dennis and Merkl, Christian}, title = {The Caring Hand that Cripples: The East German Labor Market after Reunification}, series = {American Economic Review}, volume = {96}, journal = {American Economic Review}, number = {2}, pages = {375 -- 382}, abstract = {The East German labour market has hardly made any progress since German reunification, despite massive migration flows and support from the West. We argue that East Germany is in trouble precisely because of the support it has received. This paper explores the phenomenon of 'the caring hand that cripples,' arising from bargaining by proxy, the adoption of the West German welfare system and the associated employment persistence. Even the steady decrease of labour cost (normalized by productivity) since the beginning of the 1990s did not help to kick start the East. We suggest that labour force participants fell into 'traps,' concerning low skills, ageing of the workforce, labour-saving capital and skills, capital underutilization, and unemployment arising from the decline of the tradeable sector}, language = {en} } @article{BrownMerklSnower, author = {Brown, Alessio and Merkl, Christian and Snower, Dennis}, title = {The Minimum Wage from a Two-Sided Perspective}, series = {Economics Letters}, volume = {124}, journal = {Economics Letters}, number = {3}, doi = {10.1016/j.econlet.2014.06.020}, pages = {389 -- 391}, abstract = {This paper sheds new light on the effects of the minimum wage on employment from a two-sided theoretical perspective, in which firms' job offer and workers' job acceptance decisions are disentangled. Minimum wages reduce job offer incentives and increase job acceptance incentives. We show that sufficiently low minimum wages may do no harm to employment, since their job-offer disincentives are countervailed by their job-acceptance incentives.}, language = {en} } @article{LechthalerSnower, author = {Lechthaler, Wolfgang and Snower, Dennis}, title = {Institutions and Training Inequality}, series = {European Journal of Political Economy}, volume = {28}, journal = {European Journal of Political Economy}, number = {1}, doi = {10.1016/j.ejpoleco.2011.09.004}, pages = {88 -- 104}, abstract = {We analyze the interaction among important institutional variables in the labor market (firing costs, minimum wages and unemployment benefits) in determining firm-provided training. We find that the institutional interactions - specifically, their degree of complementarity and substitutability - depends on employees' abilities. On this account, the institutional interactions influence skills inequality. We derive how the influence of one of the institutional variables above is affected by other institutional variables with respect to inequality skills arising from firm-provided training. We derive several striking results, such as: (a) the minimum wage and unemployment benefits generate increasing skills inequality whereas firing costs generate diminishing skills inequality; (b) unemployment benefits and firing costs are complements in their effects on skills disequalization, (c) firing costs and the minimum wage are complements in their effects on skills equalization, and (d) unemployment benefits and the minimum wage are substitution in their effects on skills inequality.}, language = {en} } @article{BrownOrszagSnower, author = {Brown, Alessio and Orszag, J. Michael and Snower, Dennis}, title = {Unemployment Accounts and Employment Incentives}, series = {European Journal of Political Economy}, volume = {24}, journal = {European Journal of Political Economy}, number = {3}, doi = {10.1016/j.ejpoleco.2008.06.006}, pages = {587 -- 604}, abstract = {We explore the far-reaching implications of replacing current unemployment benefit (UB) systems by an unemployment accounts (UAs) system. Under the UAs system, employed people are required to make ongoing contributions to their UAs and the balances in these accounts are available to them during periods of unemployment. The government is able to undertake balanced-budget interpersonal redistributions among the UAs. At the end of their working lives, people could transfer the remaining balances on their UAs into their pensions. We present an analytical framework to analyse the incentive effects of UAs and calibrate our model for the high high-unemployment countries of Europe. Our results suggest that this policy reform would significantly change people's employment incentives and could achieve reductions in unemployment without reducing the level of support to the unemployed.}, language = {en} } @article{LechthalerSnower, author = {Lechthaler, Wolfgang and Snower, Dennis}, title = {Minimum Wages and Training}, series = {Labour Economics}, volume = {15}, journal = {Labour Economics}, number = {6}, doi = {10.1016/j.labeco.2007.11.005}, pages = {1223 -- 1237}, abstract = {The paper analyzes the influence of minimum wages on firms' incentive to train their employees. We show that this influence rests on two countervailing effects: minimum wages (i) augment wage compression and thereby raise firms' incentives to train and (ii) reduce the profitability of employees, raise the firing rate and thereby reduce training. Our analysis shows that the relative strength of these two effects depends on the employees' ability levels. Our striking result is that minimum wages give rise to skills inequality: a rise in the minimum wage leads to less training for low-ability workers and more training for those of higher ability. In short, minimum wages create a "low-skill trap." We indicate that this effect may be important empirically. Finally, including workers' incentives to train themselves makes no major difference to our results.}, language = {en} } @article{BrownKohlbrecherMerkletal., author = {Brown, Alessio J. G. and Kohlbrecher, Britta and Merkl, Christian and Snower, Dennis}, title = {The effects of productivity and benefits on unemployment: Breaking the link}, series = {Economic Modelling}, journal = {Economic Modelling}, doi = {10.1016/j.econmod.2020.02.037}, abstract = {In the standard macroeconomic search and matching model of the labor market, there is a tight link between the quantitative effects of (i) aggregate productivity shocks on unemployment and (ii) unemployment benefits on unemployment. This tight link is at odds with the empirical literature. We show that a two-sided model of labor market search where the household and firm decisions are decomposed into job offers, job acceptances, firing, and quits can break this link. In such a model, unemployment benefits affect households' behavior directly, without having to run via the bargained wage. A calibration of the model based on U.S. JOLTS data generates both a solid amplification of productivity shocks and a moderate effect of benefits on unemployment. Our analysis shows the importance of investigating the effects of policies on the households' work incentives and the firms' employment incentives within the search process.}, language = {en} }