Household Portfolios Efficiency in the Presence of Restrictions on Investment Opportunities

This paper proposes a new test for verifying the mean-variance efficiency of household portfolios. Unlike the standard statistics, the test takes account of two additional aspects: 1) wealth consists of real estate, held in fixed proportions in the short term, as well as financial assets, and 2) it is not possible to assume short positions in several financial assets. Performing the test on Italian households’ portfolios as they appear in the SHIW 2000 survey, and treating housing as a fixed asset, we obtain an efficiency much more widespread than with common tests, revealing how inaccurate the standard theory is.

Risk Sharing in Defined-Contribution Funded Pension Systems

This paper explores the introduction of collective risk-sharing elements in defined contri-bution pension contracts. We consider status-contingent, age-contingent and asset contingent risk-sharing arrangements. All arrangements raise aggregate welfare, as measured by equiva- lent variations. While working individuals hardly benefit or may even lose, retirees experience substantial welfare gains. An increase in the tax deductability of pension contributions can be beneficial for working cohorts, but comes at the cost of a reduction in aggregate welfare due to efficiency losses.funded pensions, risk-sharing, defined contribution, inter-generational welfare, equivalent variation, stochastic simulations

Luck or Cheating? A Field Experiment on Honesty with Children

We ran an experiment with children to study the development of honesty with age. We asked each child to toss a fair coin in private and to record the outcome (white or black) in a paper sheet. We rewarded only those who reported white. We found a fraction of reported whites signifi…cantly larger than 50%, uniformly across age groups. This suggests that some children cheat when cheating is profi…table and they are not observed. In a second treatment we told children not to cheat. This reminder reduced the probability of reporting white by 18% on average, and signifi…cantly more in girls.honesty; children; fi…eld experiment

Pay Dispersion and Work Performance

The effect of intra-firm pay dispersion on work performance is controversial and the empirical evidence is mixed. High pay dispersion may act as an extra incentive for employees' effort or it may reduce motivation and team cohesiveness. These effects can also coexist and the prevalence of one effect over the other may depend on the use of different definitions of what constitutes a "team." For this paper we collected a unique dataset from the men's major soccer league in Italy. For each match we computed the exact pay dispersion of each work team and estimated its effect on team performance. Our results show that when the work team is considered to consist of only the players who contribute to the result, high pay dispersion has a detrimental impact on team performance. Several robustness checks confirm this result. In addition, we show that enlarging the definition of work team causes this effect to disappear or even become positive. Finally, we find that the detrimental effect of pay dispersion is due to worst individual performance, rather than a reduction of team cooperation.Team productivity, Incentives, Pay dispersion.

Temptation at work

To encourage worker productivity offices prohibit Internet use. Consequently, many employees delay Internet activity to the end of the workday. Recent work in social psychology, however, suggests that using willpower to delay gratification can negatively impact performance. We report data from an experiment where subjects in a Willpower Treatment are asked to resist the temptation to join others in watching a humorous video for 10 minutes. In relation to a baseline treatment that does not require willpower, we show that resisting this temptation detrimentally impacts economic productivity on a subsequent task.temptation, willpower, lab experiment.

Differentiating Indexation in Dutch Pension Funds

We investigate numerically how indexation of funded pensions for inflation can be differentiated across the various groups of fund participants. The pension arrangement is modelled after the Dutch situation. While the aggregate welfare consequences are small, group-specific consequences are more substantial with the workers and future born losing and retirees benefitting from a shift away from uniform indexation. Those welfare shifts result from systematic redistribution of welfare rather than shifts in the benefit of risk sharing provided by the system.indexation, funded pensions, welfare effects, pension buffers, stochastic simulations

The 2008 Chilean pension reform: Household financial decisions and gender differences

We evaluate the effect of the 2008 pension reform in Chile, applying a difference-in-difference estimation method to longitudinal survey data representative of the Chilean population. Our evidence suggests that those who started to receive a basic pension increased their debt more than their assets. We interpret this as an indicator of debt sustainability. The debt ratio increased significantly more for women, who may be particularly exposed to financial crises. The results raise concerns about the potential financial vulnerability of the population targeted by the reform, due to over-indebtedness

Can Temptation Explain Housing Choices over the Life Cycle?

We use individual life-history data from twelve European countries, and duration analysis that controls for unobserved heterogeneity, to investigate whether observed patterns of investment in illiquid assets and housing are consistent with predictions based on \u201ctemptation preferences\u201d. A motivating model takes into account the standard motives for saving, but also recognizes that illiquid financial assets and housing may be used by individuals who find it hard to control the temptation linked to abundant cash on hand. Even controlling for many possible motives for purchasing housing, and for unobserved heterogeneity, a large fraction of individuals become significantly more likely to buy housing after investing in illiquid assets; this finding is consistent with the predictions of the model