Rules of Thumb in Life-Cycle Saving Decisions

We analyse life-cycle saving decisions when households use simple heuristics, or rules of thumb, rather than solve the underlying intertemporal optimization problem. We simulate life-cycle saving decisions using three simple rules and compute utility losses relative to the solution of the optimization problem. Our simulations suggest that utility losses induced by following simple decision rules are relatively low. Moreover, the two main saving motives re ected by the canonical life-cycle model { long-run consumption smoothing and short-run insurance against income shocks { can be addressed quite well by saving rules that do not require computationally demanding tasks such as backward induction.saving; life-cycle models; bounded rationality; rules of thumb

Population Aging, Savings Behavior and Capital Markets

Population aging is just beginning to hit the industrialized countries in full force, and it will have a tremendous impact on capital markets. In this paper, we argue that the capital market effects of population aging are particularly strong in continental European economies such as Germany, France, and Italy, with their large and ailing pay-as-you-go public pension systems, relatively thin capital markets, and poor capital performance. The younger generations in these countries are quite aware of the need to provide for more retirement income through own private saving, and these effects will be accentuated by fundamental pension reforms that aim at more pre-funding. Population aging changes households' savings behavior and portfolio composition, and much more assets will be invested on the stock market. Capital markets will grow in size, and active institutional investors such as pension funds will become more important in continental European countries. These changes are likely to have beneficial side effects in terms of improved capital efficiency, total factor productivity, and growth. Looking at the effects of population aging on savings behavior and capital markets therefore adds a new dimension to the continuing debate about advantages and disadvantages of pay-as-you-go and fully funded pension systems.

Product market competition, corporate governance and firm performance: an empirical analysis for Germany

Productivity growth has been slow in many continental European countries over the last few decades, especially in comparison with the United States. It has been argued that lack of product market competition and poor corporate governance are two of the main reasons for this phenomenon. However, predictions from theoretical models are far from unambiguous, and empirical evidence is sparse, in particular at the level of individual firms. In this paper, we aim to close this gap with an econometric analysis of firm performance in Germany. Based on a unique panel data set with detailed information on almost 400 manufacturing firms over the 1986-94 period, we find that firms operating in industries which are characterized by more intensive product market competition experience higher rates of productivity growth. We also find weak evidence for the notion that in Germany?s bank-based system of internal control, ownership concentration is harmful for productivity growth. --competition,corporate governance,productivity

Rules of Thumb in Life-Cycle Savings Models

We analyze life-cycle savings decisions when households use simple heuristics, or rules of thumb, rather than solve the underlying intertemporal optimization problem. The decision rules we explore are a simple Keynesian rule where consumption follows income; a simple consumption rule where only a fraction of positive income shocks is saved; a rule that corresponds to the permanent income hypothesis; and two rules that have been found in experimental studies. Using these rules, we simulate life-cycle savings decisions numerically and compute the utility losses relative to the backwards solution of the intertemporal optimization problem. Our central finding is that the utility losses induced by rule-of-thumb behavior are relatively low. We conclude that behaving optimally, in the sense of solving an intertemporal optimization model, is not only costly, it is also not much better than using simpler heuristics which do not require backward induction. Our results might also explain why optimization models typically fit the main features of empirical data quite well although optimizing behavior itself is frequently rejected.

Does survey recall error explain the Deaton–Paxson puzzle?

Using recall and diary food expenditure data from Canada, we compare estimates of the household size elasticity of per capita food expenditure. In contrast to Gibson (2002), we find negative elasticities in both recall and diary data. This in turn means we find evidence of the “Deaton–Paxson puzzle” in both diary and recall data. Recall error cannot be the sole explanation of the puzzle

Survey Evidence on Conditional Norm Enforcement

We discuss survey evidence on individuals' willingness to sanction norm violations - such as evading taxes, drunk driving, fare dodging, or skiving o work - by expressing disapproval or social exclusion. Our data suggest that people condition their sanctioning behavior on their belief about the frequency of norm violations. The more commonly a norm violation is believed to occur, the lower the individuals' inclination to punish it. Based on an instrumental variable approach, we demonstrate that this pattern reflects a causal relationship

A Comparison of Recall and Diary Food Expenditure Data

Recall food expenditure data, which is the basis of a great deal of empirical work, is believed to suffer from considerable measurement error. Diary records are believed to be more accurate. We study an unusual data set that collects recall and diary data from the same households and so allows a direct comparison of the two methods of data collection. The diary data imply measurement errors in recall food expenditure data that are substantial, and which do not have the properties of classical measurement error. However, we also present evidence that the diary measures are themselves imperfect

Neurobiological Mechanisms of Metacognitive Therapy – An Experimental Paradigm

IntroductionThe neurobiological mechanisms underlying the clinical effects of psychotherapy are scarcely understood. In particular, the modifying effects of psychotherapy on neuronal activity are largely unknown. We here present data from an innovative experimental paradigm using the example of a patient with treatment resistant obsessive-compulsive disorder (trOCD) who underwent implantation of bilateral electrodes for deep brain stimulation (DBS). The aim of the paradigm was to examine the short term effect of metacognitive therapy (MCT) on neuronal local field potentials (LFP) before and after 5 MCT sessions.MethodsDBS electrodes were implanted bilaterally with stereotactic guidance in the bed nucleus of the stria terminalis/ internal capsule (BNST/IC). The period between implantation of the electrodes and the pacemaker was used for the experimental paradigm. DBS electrodes were externalized via extension cables, yielding the opportunity to record LFP directly from the BNST/IC. The experimental paradigm was designed as follows: (a) baseline recording of LFP from the BNST/IC, (b) application of 5 MCT sessions over 3 days, (c) post-MCT recording from the BNST/IC. The Obsessive-Compulsive Disorder- scale (OCD-S) was used to evaluate OCD symptoms.ResultsOCD symptoms decreased after MCT. These reductions were accompanied by a decrease of the relative power of theta band activity, while alpha, beta, and gamma band activity was significantly increased after MCT. Further, analysis of BNST/IC LFP and frontal cortex EEG coherence showed that MCT decreased theta frequency band synchronization.DiscussionImplantation of DBS electrodes for treating psychiatric disorders offers the opportunity to gather data from neuronal circuits, and to compare effects of therapeutic interventions. Here, we demonstrate direct effects of MCT on neuronal oscillatory behavior, which may give possible cues for the neurobiological changes associated with psychotherapy

Endothelial junctional membrane protrusions serve as hotspots for neutrophil transmigration

Upon inflammation, leukocytes rapidly transmigrate across the endothelium to enter the inflamed tissue. Evidence accumulates that leukocytes use preferred exit sites, alhough it is not yet clear how these hotspots in the endothelium are defined and how they are recognized by the leukocyte. Using lattice light sheet microscopy, we discovered that leukocytes prefer endothelial membrane protrusions at cell junctions for transmigration. Phenotypically, these junctional membrane protrusions are present in an asymmetric manner, meaning that one endothelial cell shows the protrusion and the adjacent one does not. Consequently, leukocytes cross the junction by migrating underneath the protruding endothelial cell. These protrusions depend on Rac1 activity and by using a photo-activatable Rac1 probe, we could artificially generate local exit-sites for leukocytes. Overall, we have discovered a new mechanism that uses local induced junctional membrane protrusions to facilitate/steer the leukocyte escape/exit from inflamed vessel walls