Kießling, Lukas Benedikt Robert: Essays in Applied Microeconomics. - Bonn, 2020. - Dissertation, Rheinische Friedrich-Wilhelms-Universität Bonn.
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author = {{Lukas Benedikt Robert Kießling}},
title = {Essays in Applied Microeconomics},
school = {Rheinische Friedrich-Wilhelms-Universität Bonn},
year = 2020,
month = jan,

note = {What determines human behavior? This seemingly simple question is at the core of economics and the social sciences more generally. Yet, it is one of the most difficult questions to answer for at least two reasons: First, the presence and choices of others influence our own behavior and requires a systematic study of social aspects. Second, every decision relies on our subjective beliefs about unobserved states of the world, and these beliefs may reflect heterogeneous expectations about the consequences of different choices. By investigating the role of peers for behavior and by studying the systematic variation in beliefs, this thesis contributes to our understanding of human behavior and decision-making.
It is widely accepted that peers influence consumption behavior, general well-being, and performance. Yet, we do not know much about how individuals choose these peers in the first place and about the consequences of peer self-selection. The first two chapters, Chapters 1 and 2, which are joint work with Jonas Radbruch and Sebastian Schaube, therefore aim at filling this gap. We first examine how allowing individuals to choose with whom to interact affects their performance relatively to exogenously assigned peers (Chapter 1), and second, whom they actually choose as peers (Chapter 2). In order to study this self-selection of peers, we conduct a field experiment in secondary schools and allow students in two treatment arms to select their peers themselves, while in another they are randomly assigned to a peer.
Chapter 1 (Self-selection of Peers and Performance) analyzes the consequences of peer self-selection on performance. It documents that individuals, who can self-select their peers, improve their performance more than those with randomly assigned peers. In principle, these differences in performance may stem from two sources: First, individuals interact with different peers, who influence performance. Thus, accounting for differences in the peer composition may explain our findings. Second, the results could stem from a psychological effect of being able to self-select peers rather than having them assigned. Although a peer's characteristics such as his or her performance explain part of the variation in one's own performance, these peer effects cannot explain the treatment effects. Rather, our data indicate a positive effect on performance when having autonomy over peer assignments. Furthermore, the presence of peer effects in multiple dimensions has implications for the design of reassignment policies such as tracking regimes, which are based on, e.g., measures of students' ability. If policy-makers want to reassign students into classrooms or workers into teams based on peer effects in a single dimension only, they neglect the fact that reassigning rules simultaneously change other peer characteristics, giving rise to peer effects apart from the targeted dimension. These effects can counterbalance each other leading to ambiguous net effects.
Chapter 2 (Determinants of Peer Selection) studies whom individuals choose as peers and links these choices to three potential determinants. Particularly, the chapter assesses the extent to which the selection of peers depends on (i) the relative performance of peers, (ii) personality differences, and (iii) the presence of friendship ties. By quantifying the relative contributions of performance and social aspects for peer choices, we find that friendship is the most important determinant, but individuals exhibit sizable homophily both in past performance and personality. These results help to explain why previous studies often find that different groups exert peer effects of different sizes. In particular, we suggest that selective peer choices may give rise to individual-specific peer groups that result in differential peer effects.
Chapters1 and 2 document peer effects in performance and that individuals prefer peers who are similar to themselves. Although such peer choices and peer effects yield a correlated outcomes among peers, decisions often remain highly heterogeneous in general. One potential explanation for such heterogeneities are differences in beliefs that individuals hold. The aim of Chapters 3 and 4 is to systematically study the heterogeneity of subjective beliefs and expectations in two specific contexts. First, I investigate parents' beliefs about the returns to different parenting styles and neighborhoods (Chapter 3). Second, in joint work with Pia Pinger, Philipp Seegers, and Jan Bergerhoff, I characterize gender differences in students' wage expectations and discuss potential drivers thereof (Chapter 4).
Parents are crucial for the development and success of children as they grow up. However, not much is known about how parents decide how to raise their children, and how parenting decisions depend on the environment in which a family lives. In order to answer these questions, Chapter 3 (Understanding Parental Decision-making: Beliefs about Returns to Parenting Styles and Neighborhoods) studies parents' beliefs about the returns to two factors affecting the development and long-term outcomes of children: (i) parenting styles defined by the extent of warmth and control parents employ in raising their children, and (ii) neighborhood quality. Based on a representative sample of over 2,000 parents in the United States, I show that parents hold well-formed beliefs: they expect large returns to the warmth dimension of parenting as well as to living in a good neighborhood. Regarding the relation of both factors, I find that parents perceive parenting as being able to compensate partly for adverse environments. Moreover, mothers expect larger returns than fathers, but there is no socioeconomic gradient in perceived returns. Parents' perceived returns are relevant for their actual decision-making in so far that they are predictive for actual parenting behavior. Hence, my results highlight that parental beliefs are an important determinant of parental decision-making, but cannot explain socioeconomic differences in parenting.
Chapter 4 (Gender Differences in Wage Expectations: Sorting, Children, and Negotiation Styles) presents evidence from a large-scale study on gender differences in wage expectations based on a sample of over 15,000 students in Germany. Studying such wage expectations before labor market entry is important as they may determine further educational or labor market choices, affect within-household bargaining or negotiations with prospective employers, and may have consequences for financial decision-making, e.g., in terms of an optimal choice of retirement and savings plans. We document a large gender gap in expected wages that amounts to approximately 500,000 EUR over the life-cycle and resembles actual wage differences. In order to understand the underlying causes and determinants, we relate these expected wages to (i) differential sorting into majors, industries, and occupations, (ii) differences in child-rearing plans, and (iii) male-female differences in negotiation styles. We show that males and females sort themselves into different majors, industries, and occupations, and follow different negotiation strategies. While child-rearing plans are comparable across genders, females expect child-penalties for giving birth to children before the age of 30.
In summary, this thesis focuses on human behavior and decision-making by investigating the role of peer influences and subjective expectations. Using data from field experiments and large-scale surveys, the four chapters provide a starting point for further analyses of social aspects and heterogeneous beliefs.},

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