Precautionary Saving and Altruism

The potential importance of the precautionary motive for saving has been noted in many studies during the last decades. This paper examines the determination of precautionary saving when people have access to intra-family risk sharing. I show that, with uncertain future income, altruism per se can induce time consistent, however, not necessarily ex ante efficient, risk sharing between risk averse spouses. The more altruistic the couple is, the closer is the solution to the efficient one. Also welfare and savings effects from social insurance turn out to be sensitive to assumptions about family structure. For risk sharing couples, the introduction of a compulsory insurance scheme may have substantially smaller effects on welfare and precautionary savings.Precautionary saving; altruism; risk sharing; marriage; intra-family insurance

Endogenous Norm Formation Over the Life Cycle – The Case of Tax Evasion

This paper offers an explanation to why the general observation that elderly hold stronger moral attitudes than young ones may be an age rather than a cohort effect. We apply mechanisms from social psychology to explain how personal norms may evolve over the life cycle. We assume that people update their norms influenced by their own past behavior (e.g., cognitive dissonance) and/or by the attitudes of their peers (normative conformity). We apply the theory on actual norm distributions for young and old concerning tax evasion. Allowing for heterogeneous updating of norms where only those who identify with their network are actually conforming with it, while the others are only influenced by their own past behavior, we can explain the difference between young and old people’s moral values as an age effect through endogenous norm formation.Social norms; Endogenous norms; Tax evasion; Cognitive dissonance; Self-signaling; Normative conformity

Within-the-family education and its impact on equality

This is a theoretical study of human-capital formation, where parental, as well as public investments are essential. Policy influence rich and poor parents differently when they make educational decisions. Rich parents allocate resources efficiently between physical bequests and educational investments, while poor parents only afford investments in children's human capital. Therefore educational equality between rich and poor children is not necessarily promoted by further investments in public schooling. However, a simple PAYGO-system could yield efficient allocation also for poor children.Human capital, public education, bequest, altruism

Social Preferences in Childhood and Adolescence: A Large-Scale Experiment

Social preferences have been shown to be an important determinant of economic decision making for many adults. We present a large-scale experiment with 883 children and adolescents, aged eight to seventeen years. Participants make decisions in eight simple, one-shot allocation tasks, allowing us to study the distribution of social preference types across age and across gender. Our results show that when children and teenagers grow older, inequality aversion becomes a gradually less prominent motivating force of allocation decisions. At the same time, efficiency concerns increase in importance for boys, and maximin-preferences turn more important in shaping decisions of girls.children, social preferences, age, gender, experiment

Social preferences in childhood and adolescence. A large-scale experiment to estimate primary and secondary motivations

We elicit social preferences of 883 children and teenagers, aged eight to 17 years, in an experiment. Using an econometric mixture model we estimate a subject\u2019s primary and secondary social preference motivations. The secondary motivation indicates the motivation that becomes relevant when the primary motivation implies indifference between various choices. For girls, particularly older ones, maximin-preferences are the most frequent primary motivation, while for boys efficiency concerns are most relevant. Examining secondary motivations reveals that girls are mostly social-welfare-oriented, with strong equity concerns. Boys are also oriented towards social welfare, but are more concerned with efficiency than with equity

Tax Morale and Policy Intervention

This paper deals with tax morale and how norms may evolve over time. The special focus is on buying black-market services. I apply mechanisms from social psychology to explain how personal norms may evolve due to one's own past behavior through self-signaling and due to conformity based on social interactions. These changes over time result in multiple equilibria, so that the economy can develop stronger social norms and less evasion over time, or weaker norms and more evasion in the long run. An economy on a trajectory toward the “bad” equilibrium may be permanently pushed onto a trajectory toward the “good” equilibrium by means of a suffciently strong temporary policy. Observations from a recent tax reform in Sweden strongly support the theory and suggest that other policies than enforcement may indeed be a powerful tool in inuencing both behavior and attitudes.JEL: D91; H2

A theoretical framework explaining the mechanisms of nudging

In this paper we develop a theoretical model to clarify the underlying mechanisms that drive individual decision making and responses to behavioral interventions, such as nudges. The contribution of the paper is three-fold: First, the model provides a theoretical framework that comprehensively structures the individual decision-making process applicable to a wide range of choice situations. Second, we reduce the confusion regarding what should be called a nudge by offering a clear classification of behavioral interventions. We distinguish among what we label as pure nudges, preference nudges, and other behavioral interventions. Third, we identify the mechanisms behind the effectiveness of behavioral interventions based on the structured decision-making process. Hence, the model can be used to predict under which circumstances, and in which choice situations, a nudge is likely to be effective.JEL: D11, D91

Puzzling tax attitudes and labels

We find that through labeling one can significantly affect attitudes towards a tax. The gasoline tax meets a stronger reluctance than virtually the same tax when it is called the CO2 tax on gasoline