Hostname: page-component-745bb68f8f-b6zl4 Total loading time: 0 Render date: 2025-01-07T19:24:38.819Z Has data issue: false hasContentIssue false
  • English
  • Français

Do negative economic shocks affect cognitive function, adherence to social norms and loss aversion?

Published online by Cambridge University Press:  01 January 2025

Francesco Bogliacino Open the ORCID record for Francesco Bogliacino [Opens in a new window]  and
Felipe Montealegre
Francesco Bogliacino*
Affiliation:
Centro de Investigaciones para el Desarrollo, Universidad Nacional de Colombia, Bogotá, Colombia Facultad de Ciencias Economicas, Universidad Nacional de Colombia, Bogotá, Colombia
Felipe Montealegre
Affiliation:
Centro de Investigaciones para el Desarrollo, Universidad Nacional de Colombia, Bogotá, Colombia
*
e-mail: [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

Households are frequently subject to income and asset shocks. We performed a lab experiment, inducing losses on a real effort task, after which we measured cognitive performance, loss aversion and cheating behavior. We found that asset losses, but not income losses, act as a cognitive load, by decreasing accuracy and increasing response times. We did not detect any change in dishonesty or loss aversion.

Keywords

Cognitive functionCheatingSocial normLoss aversionNegative shockIncomeAsset

JEL classification

C91: Laboratory, Individual Behavior D81: Criteria for Decision-Making under Risk and Uncertainty D91: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making‡
Type
Original Paper
Information
Journal of the Economic Science Association , Volume 6 , Issue 1 , June 2020 , pp. 57 - 67
Copyright
Copyright © Economic Science Association 2020

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

Electronic supplementary material The online version of this article (https://doi.org/10.1007/s40881-020-00091-4) contains supplementary material, which is available to authorized users.

References

Aksoy, B., Palma, M. A. (2019). The effects of scarcity on cheating and in-group favoritism. Journal of Economic Behavior & Organization, 165, 100–117. 10.1016/j.jebo.2019.06.024CrossRefGoogle Scholar
Baddeley, A. D., Hitch, G. (1974). Working memory. Psychology of Learning and Motivation, 8, 47–89. 10.1016/S0079-7421(08)60452-1CrossRefGoogle Scholar
Becker, G. S. (1968). Crime and punishment: an economic approach. Journal of Political Economy, 76(2), 169–217. 10.1086/259394CrossRefGoogle Scholar
Bicchieri, C. (2017). Norms in the wild. In Norms in the wild: How to diagnose, measure, and change social norms. https://doi.org/10.1093/acprof:oso/9780190622046.001.0001.CrossRefGoogle Scholar
Bogliacino, F., Grimalda, G., Ortoleva, P., Ring, P. (2017). Exposure to and recall of violence reduce short-term memory and cognitive control. Proceedings of the National Academy of Sciences, 114(32), 8505–8510. 10.1073/pnas.1704651114CrossRefGoogle ScholarPubMed
Bogliacino, F., Jiménez Lozano, L., Reyes, D. (2018). Socioeconomic stratification and stereotyping: lab-in-the-field evidence from Colombia. International Review of Economics, 65(1), 77–118. 10.1007/s12232-017-0285-4CrossRefGoogle Scholar
Carvalho, L. S., Meier, S., Wang, S. W. (2016). Poverty and economic decision-making: evidence from changes in financial resources at payday. The American Economic Review, 106(2), 260–284. 10.1257/aer.20140481CrossRefGoogle ScholarPubMed
Chen, D. L., Schonger, M., Wickens, C. (2016). oTree-an open-source platform for laboratory, online, and field experiments. Journal of Behavioral and Experimental Finance, 9, 88–97. 10.1016/j.jbef.2015.12.001CrossRefGoogle Scholar
Dai, Z., Galeotti, F., Villeval, M. C. (2018). Cheating in the lab predicts fraud in the field: An experiment in public transportation. Management Science, 64(3), 1081–1100. 10.1287/mnsc.2016.2616CrossRefGoogle Scholar
Dean, M., Ortoleva, P. (2019). The empirical relationship between nonstandard economic behaviors. Proceedings of the National Academy of Sciences, 116(33), 16262–16267. 10.1073/pnas.1821353116CrossRefGoogle ScholarPubMed
Diamond, A. (2013). Executive functions. Annual Review of Psychology, 64(1), 135–168. 10.1146/annurev-psych-113011-143750CrossRefGoogle ScholarPubMed
Dinno, A. 2017. tostregress: Linear regression tests for equivalence. Stata software package. https://www.alexisdinno.com/stata/tost.html.Google Scholar
Ehrlich, I. (1973). Participation in illegitimate activities: A theoretical and empirical investigation. Journal of Political Economy, 81(3), 521–565. 10.1086/260058CrossRefGoogle Scholar
Engle, R. W., Laughlin, J. E., Tuholski, S. W., Conway, A. R. A. (1999). Working memory, short-term memory, and general fluid intelligence: A latent-variable approach. Journal of Experimental Psychology: General, 10.1037/0096-3445.128.3.309CrossRefGoogle Scholar
Fischbacher, U., Föllmi-Heusi, F. (2013). Lies in disguise. An experimental study on cheating. Journal of the European Economic Association, 11(3), 525–547. 10.1111/jeea.12014CrossRefGoogle Scholar
Fox, C. R., & Poldrack, R. A. (2009) Prospect theory and the brain. In Neuroeconomics (pp. 145–173). https://doi.org/10.1016/B978-0-12-374176-9.00011-7.CrossRefGoogle Scholar
Gächter, S., Johnson, E. J., Herrmann, A. (2010). Individual-level loss aversion in riskless and risky choices. CeDEx Discussion Paper Series, 10.1007/s10273-011-1262-2Google Scholar
Haushofer, J., Fehr, E. (2014). On the psychology of poverty. Science, 344, 862–867. 10.1126/science.1232491CrossRefGoogle ScholarPubMed
Haushofer, J., Schunk, D., & Fehr, E. (2013). Negative income shocks increase discount rates. University of Zurich Working Paper.Google Scholar
Kahneman, D. (2011). Thinking, fast and slow (Anchor Can). Doubleday Canada.Google Scholar
Kahneman, D., Tversky, A. (1979). Prospect theory: An analysis of decision under risk. Econometrica, 47(2),263. 10.2307/1914185CrossRefGoogle Scholar
Kremer, M., Rao, G., Schilbach, F., & Barnheim, D., Della Vigna, S., Laibson, D. (2019). Behavioral Development Economics Handbook of Behavioral Economics, Foundations and Applications II Elsevier: North Holland.Google Scholar
Lakens, D. (2017). Equivalence tests: A practical primer for t tests, correlations, and meta-analyses. Social Psychological and Personality Science, 8(4), 355–362. 10.1177/1948550617697177CrossRefGoogle Scholar
Mani, A., Mullainathan, S., Shafir, E., Zhao, J. (2013). Poverty impedes cognitive function. Science, 341(6149), 976–980. 10.1126/science.1238041CrossRefGoogle ScholarPubMed
Niederle, M., Vesterlund, L. (2007). Do women shy away from competition? Do men compete too much? Quarterly Journal of Economics, 122(3), 1067–1101. 10.1162/qjec.122.3.1067CrossRefGoogle Scholar
Pammi, V. S. C., Ruiz, S., Lee, S., Noussair, C. N., Sitaram, R. (2017). The effect of wealth shocks on loss aversion: Behavior and neural correlates. Frontiers in Neuroscience, 10.3389/fnins.2017.00237CrossRefGoogle Scholar
Rabin, M. (2000). Risk aversion and expected utility: A calibration theorem. Econometrica, 68(5), 1281–1292. 10.1111/1468-0262.00158CrossRefGoogle Scholar
Supplementary material: File

Bogliacino and Montealegre supplementary material

Bogliacino and Montealegre supplementary material
Download Bogliacino and Montealegre supplementary material(File)
File 1.6 MB