Essays in Applied Microeconomics

Abstract

This dissertation consists of four independent chapters, which all study determinants of human behavior. All chapters leverage insights from behavioral economics or methods from experimental economics. The unifying framework is that I use empirical evidence from natural, field or lab experiments, which allow a clean causal identification of different determinants of human behavior. <br /> In chapter one (based on joint work with Sebastian J. Goerg and Sebastian Kube), I study the role of implicit effort costs for effort provision and the effectiveness of incentive schemes. Agents’ decisions to exert effort depend on the incentives and the potential costs involved. So far, most of the attention has been on the incentive side. However, our laboratory experiments underline that both the incentive and the cost side can be used separately to shape work performance. In our experiment, subjects work on a real-effort slider task. Between treatments, we vary the incentive scheme used for compensating workers. Additionally, by varying the available outside options, we explore the role of implicit costs of effort in determining workers’ performance. We observe that incentive contracts and implicit costs interact in a nontrivial manner. In general, performance decreases as implicit costs increase. Yet the magnitude of the reaction differs across incentive schemes and across the offered outside options, which, in turn, alters estimated output elasticities. In addition, comparisons between incentive schemes crucially depend on the implicit costs. <br /> In chapter two (based on joint work with Andreas Grunewald and Steffen Altmann), I study the role of scarce cognitive resources as a source of passive behavior and the impact of choice-promoting policies for people with scarce cognitive resources. Passive behavior is ubiquitous even when facing various alternatives to choose from, people commonly fail to take decisions. This chapter provides evidence on the cognitive foundations of such "passive choices" and studies implications for policies that encourage active decision making. In an experiment designed to study passive behavior, we document three main results. First, we demonstrate that scarcity of cognitive resources leads to passive behavior. Second, policies that encourage active choice succeed in reducing passivity and improve decisions in the targeted domain. Third, however, these benefits of choice-promoting policies come at the cost of negative cognitive spillovers to other domains. <br /> In chapter three (based on joint work with Lukas Kiessling and Sebastian Schaube), I study the impact of self-selected peers on performance. In many natural environments, carefully chosen peers influence individual behavior. Using a framed field experiment at secondary schools, we examine how self-selected peers affect performance in contrast to randomly assigned ones.We find that self-selection improves performance by approximately 15% of a standard deviation relative to randomly assigned peers. Our results document peer effects in multiple characteristics and show that self-selection changes these characteristics. However, a decomposition reveals that variations in the peer composition contribute only little to the estimated average treatment effects. Rather, we find that self-selection has a direct effect on performance. <br /> In chapter four (based on joint work with Amelie Schiprowski), I study how the assessment of a candidate is influenced by the other candidates seen by the same interviewer. We leverage novel data on more than 9,000 interviewer assessments made within the admission process of a large study grant program. We find that a candidate's assessment decreases in the measured quality of all other candidates seen by the same interviewer. The influence of the previous candidate, however, exceeds the influence of any other candidate by a factor of about three. The additional effect of the previous candidate appears to be driven by the exaggeration of small differences between current and previous candidate quality. Moreover, it is asymmetric with respect to gender and favors male candidates who follow a female candidate.