TY - RPRT A1 - Bartke, Simon A1 - Bosworth, Steven J. A1 - Snower, Dennis A1 - Chierchia, Gabriele T1 - The Influence of Induced Care and Anger Motives on Behavior, Beliefs and Perceptions in a Public Goods Game N2 - 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. KW - Public goods, motivation, stability of preferences, anger, care, framing Y1 - 2016 UR - https://www.ifw-kiel.de/fileadmin/Dateiverwaltung/IfW-Publications/Simon_Bartke/the-influence-of-induced-care-and-anger-motives-on-behavior-beliefs-and-perseptions-in-a-public-goods-game/kwp-2054.pdf ER - TY - JOUR A1 - Snower, Dennis A1 - Ahrens, Steffen A1 - Pirschel, Inske T1 - A Theory of Price Adjustment under Loss Aversion JF - Journal of Economic Behavior & Organization N2 - 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. KW - Price sluggishness Loss aversion State-dependent pricing Y1 - 2017 U6 - https://doi.org/10.1016/j.jebo.2016.12.008 VL - 134 SP - 78 EP - 95 ER - TY - RPRT A1 - Snower, Dennis A1 - Bosworth, Steven J. T1 - Identity-Driven Cooperation versus Competition N2 - 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 KW - motivation reflexivity cooperation identity technological progress bowling alone Y1 - 2016 UR - https://www.econstor.eu/handle/10419/130402 ER - TY - JOUR A1 - Snower, Dennis A1 - Akerlof, George A. T1 - Bread and Bullets JF - Elsevier Journal of Economic Behavior & Organization N2 - 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. KW - Narrative Motivation Attention Prediction Identity Social assignment Y1 - 2016 U6 - https://doi.org/10.1016/j.jebo.2015.10.021 VL - 126 IS - June 2016 SP - 58 EP - 71 ER - TY - JOUR A1 - Snower, Dennis A1 - Merkl, Christian T1 - The Caring Hand that Cripples: The East German Labor Market after Reunification JF - American Economic Review N2 - 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 Y1 - 2006 UR - http://hdl.handle.net/10419/3828 VL - 96 IS - 2 SP - 375 EP - 382 ER - TY - JOUR A1 - Brown, Alessio A1 - Merkl, Christian A1 - Snower, Dennis T1 - The Minimum Wage from a Two-Sided Perspective JF - Economics Letters N2 - 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. Y1 - 2014 U6 - https://doi.org/10.1016/j.econlet.2014.06.020 VL - 124 IS - 3 SP - 389 EP - 391 ER - TY - JOUR A1 - Lechthaler, Wolfgang A1 - Snower, Dennis T1 - Institutions and Training Inequality JF - European Journal of Political Economy N2 - 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. KW - Firm training; Skill inequality; Institutions Y1 - 2012 U6 - https://doi.org/10.1016/j.ejpoleco.2011.09.004 VL - 28 IS - 1 SP - 88 EP - 104 ER - TY - JOUR A1 - Brown, Alessio A1 - Orszag, J. Michael A1 - Snower, Dennis T1 - Unemployment Accounts and Employment Incentives JF - European Journal of Political Economy N2 - 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. KW - Unemployment benefits, Unemployment accounts, Redistribution, Employment, Unemployment Y1 - 2008 U6 - https://doi.org/10.1016/j.ejpoleco.2008.06.006 VL - 24 IS - 3 SP - 587 EP - 604 ER - TY - JOUR A1 - Lechthaler, Wolfgang A1 - Snower, Dennis T1 - Minimum Wages and Training JF - Labour Economics N2 - 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. KW - Minimum; Wage; Firm; Training; Skills; Inequality Y1 - 2008 U6 - https://doi.org/10.1016/j.labeco.2007.11.005 VL - 15 IS - 6 SP - 1223 EP - 1237 ER - TY - JOUR A1 - Brown, Alessio J. G. A1 - Kohlbrecher, Britta A1 - Merkl, Christian A1 - Snower, Dennis T1 - The effects of productivity and benefits on unemployment: Breaking the link JF - Economic Modelling N2 - 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. Y1 - 2021 U6 - https://doi.org/10.1016/j.econmod.2020.02.037 ER - TY - JOUR A1 - Lima de Miranda, Katharina A1 - Snower, Dennis T1 - Recoupling Economic and Social Prosperity JF - Global Perspectives N2 - This paper explores a new theoretical and empirical approach to the assessment of human well-being, relevant to current challenges of social fragmentation in the presence of globalization and technological advance. We present two indexes of well-being — solidarity (S) and agency (A) — to be considered alongside the standard indexes of material gain (G) and environmental sustainability (E). The four indexes —SAGE— form a balanced dashboard for evaluating well-being. The solidarity index covers the needs of humans as social creatures, living in societies that generate a sense of social belonging. The agency index involves people’s need to influence their fate through their own efforts. While “economic prosperity” (material gain) is conventionally measured through GDP per capita, “social prosperity” can be measured through our solidarity and agency indexes, alongside environmental sustainability that is measured through the Environmental Performance Index. The SAGE dashboard is meant to provide a “sage” approach to assessing well-being, since it aims to denote sagacity in the pursuit and satisfaction of fundamental human needs and purposes. Many of the prominent challenges of the 21st century, including the dissatisfaction of population groups who feel left behind by globalization and technological advance, may be viewed in terms of a “decoupling” of economic prosperity from social prosperity.We present a theoretical model that provides a new perspective on the welfare effects of globalization and automation. The dashboard is meant to provide an empirical basis for mobilizing action in government, business, and civil society to promote a recoupling of economic and social prosperity. KW - well-being, social sustainability, social solidarity, social inclusion, social cohesion, empowerment, inequality, beyond gdp Y1 - 2020 U6 - https://doi.org/10.1525/001c.11867 SN - 2575-7350 VL - 1 IS - 1 SP - 1 EP - 30 ER - TY - JOUR A1 - Lima de Miranda, Katharina A1 - Snower, Dennis J. T1 - The societal responses to COVID-19: Evidence from the G7 countries JF - Proceedings of the National Academy of Sciences N2 - This paper provides a picture of how societies in the G7 countries have responded to the COVID-19 pandemic. Our point of departure is to examine the effects of the pandemic in terms of four fundamental normative sources for well-being: Solidarity (S; willingness for social cooperation), Agency (A; empowerment to shape one’s prospects through one’s own efforts), GDP (G), and Environmental Performance (E)—SAGE for short. The normative foundations of SAGE are communitarianism, classical liberalism, materialistic utilitarianism, and ecoethics. We find that although G and E responded predictably and uniformly to the pandemic (such as G declining and carbon emissions improving), the societal responses were strikingly different. Societies that are cohesive and empowered (high S and A) may be expected to cope with the pandemic better than those that are fragmented and disempowered (low S and A). Furthermore, the pandemic has had diverse effects on S and A; while some societies became cohering and empowering (rising S and A), others became fragmenting and disempowering (falling S and A), and yet others became fragmenting and empowering. We also show that most G7 countries experienced greater tribalization (measured as the difference between inward S and outward S) during the pandemic. These trends are a matter of concern since they suggest that the willingness and perceived ability to address collective challenges collectively have waned. The analysis also suggests that governments’ social policies may have an important role to play alongside economic and health policies in coping with the pandemic. Y1 - 2022 U6 - https://doi.org/10.1073/pnas.2117155119 SN - 0027-8424 VL - 119 IS - 25 ER -