Research

Working papers

Job History, Non-cognitive Skills, and Employability

We use laboratory and field experiments and a survey experiment with Human Resources professionals to investigate whether frequent job changes provide a signal of poor non-cognitive skills and whether firms therefore use employment histories to discriminate against employees who switch jobs frequently. Across all three studies, we find consistent evidence that workers who change jobs less frequently have, or are perceived to have, better non-cognitive skills, and are thus more employable.These findings highlight the importance of job history as a signal of non-cognitive skills in labor markets, and point to a cost of frequent job changes for workers.

Download Paper.  Featured in Capital Ideas.

Online Appendix

Hidden Persuaders: Do Small Gifts Lubricate Business Negotiations?

Gift-giving customs are ubiquitous in social, political, and business life. Legal regulation and industry guidelines for gifts are often based on the assumption that large gifts have the potential to influence behavior and create conflicts of interest, but small gifts do not. However, scientific evidence on the impact of small gifts on business relationships is scarce. We conducted a controlled field experiment in collaboration with sales agents of a multinational consumer products company to study the influence of small gifts on the outcome of business negotiations. We find that small gifts matter. On average, sales representatives generate more than twice as much revenue when they distribute a small gift at the onset of their negotiations. However, we also find that small gifts tend to be counterproductive when purchasing and sales agents meet for the first time, underlining that the nature of the business relationship crucially affects the profitability of gifts.

Download Paper

 

Publications

Laboratory Measure of Cheating Predicts School Misconduct

We conducted an experiment with middle and high school students to test the external validity of a common laboratory measure of cheating. Subjects performed several coin tosses and earned money depending on the outcomes they reported. Because the coin tosses were not monitored, subjects faced a financial incentive to misreport their outcomes without having to worry about getting caught. We linked the responses from the lab experiment with three measures of school misconduct (i.e., disruptiveness in class, failure to complete homework, and absenteeism). The findings show that cheating in the lab signicantly predicts misbehavior in school, suggesting that the experimental measure of cheating generalizes qualitatively to naturally occurring environments.

Download Paper

Online Appendix

Increasing Honesty in Humans with Noninvasive Brain Stimulation

Honesty plays a key role in social and economic interactions and is crucial for societal functioning. However, breaches of honesty are pervasive and cause significant societal and economic problems that can affect entire nations. Despite its importance, remarkably little is known about the neurobiological mechanisms supporting honest behavior. We demonstrate that honesty can be increased in humans with transcranial direct current stimulation (tDCS) over the right dorsolateral prefrontal cortex. Participants (n = 145) completed a die-rolling task where they could misreport their outcomes to increase their earnings, thereby pitting honest behavior against personal financial gain. Cheating was substantial in a control condition but decreased dramatically when neural excitability was enhanced with tDCS. This increase in honesty could not be explained by changes in material self-interest or moral beliefs and was dissociated from participants’ impulsivity, willingness to take risks, and mood. A follow-up experiment (n = 156) showed that tDCS only reduced cheating when dishonest behavior benefited the participants themselves rather than another person, suggesting that the stimulated neural process specifically resolves conflicts between honesty and material self-interest. Our results demonstrate that honesty can be strengthened by noninvasive interventions and concur with theories proposing that the human brain has evolved mechanisms dedicated to control complex social behaviors.

Download Paper and Supporting Information

Do Professional Norms in the Banking Industry Favor Risk-Taking

In recent years, the banking industry has witnessed several cases of excessive risk-taking that have frequently been attributed to problematic professional norms. We conducted experiments with employees from several banks where we manipulated the saliency of their professional identity and subsequently measured their risk aversion in a real-stake investment task. If bank employees are exposed to professional norms that favor risk-taking, they should become more willing to take risks when their professional identity is salient. We find, however, that subjects take significantly less risk, challenging the view that the professional norms generally increase bank employees' willingness to take risks.

Download Paper

Online Appendix

Bad Boys: How Criminal Identity Salience Affects Rule Violation

We conducted an experiment with 182 inmates from a maximum security prison to analyze the impact of criminal identity salience on cheating. The results show that inmates cheat more when we exogenously render their criminal identity more salient. This effect is specific to individuals who have a criminal identity, because an additional placebo experiment shows that regular citizens do not become more dishonest in response to crime-related reminders. Moreover, our experimental measure of cheating correlates with inmates' offenses against in-prison regulation. Together, these findings suggest that criminal identity salience plays a crucial role in rule violating behavior.

Download Paper. Link to published version.

Online Appendix

Featured in Freakonomics Blog

Business Culture and Dishonesty in the Banking Industry

Trust in others’ honesty is a key component of the long-term performance of firms, industries, and even whole countries. However, in recent years, numerous scandals involving fraud have undermined confidence in the financial industry. Contemporary commentators have attributed these scandals to the financial sector’s business culture, but no scientific evidence supports this claim. Here we show that employees of a large, international bank behave, on average, honestly in a control condition. However, when their professional identity as bank employees is rendered salient, a significant proportion of them become dishonest. This effect is specific to bank employees because control experiments with employees from other industries and with students show that they do not become more dishonest when their professional identity or bank-related items are rendered salient. Our results thus suggest that the prevailing business culture in the banking industry weakens and undermines the honesty norm, implying that measures to re-establish an honest culture are very important.                                                     

Download Paper and Supplementary Information

Summary of the Study  (English / Deutsch)

Commentary by Marie Claire Villeval

Evidence for Countercyclical Risk Aversion: An Experiment with Financial Professionals

Countercyclical risk aversion can explain major puzzles such as the high volatility of asset prices but evidence for its existence is scarce because of the host of factors that simultaneously change during financial cycles. We circumvent these problems by priming financial professionals with either a boom or a bust scenario. Subjects primed with a financial bust were substantially more fearful and risk averse than those primed with a boom, suggesting that fear may play an important role in countercyclical risk aversion. The mechanism described here is relevant for theory and may explain self-reinforcing processes that amplify market dynamics.

Download Paper. Link to published version

Elections and Deceptions: An Experimental Study on the Behavioral Effects of Democracy

Traditionally, the virtue of democratic elections has been seen in their role as means of screening and sanctioning shirking public officials. This paper proposes a novel rationale for elections and political campaigns considering that candidates incur psychological costs of lying, in particular from breaking campaign promises. These non-pecuniary costs imply that campaigns influence subsequent behavior, even in the absence of reputational or image concerns. Our lab experiments reveal that promises are more than cheap talk. They influence the behavior of both voters and their representatives. We observe that the electorate is better off when their leaders are elected democratically rather than being appointed exogenously - but only in the presence of electoral campaigns. In addition, we find that representatives are more likely to serve the public interest when their approval rates are high. Altogether, our results suggest that elections and campaigns confer important benefits beyond their screening and sanctioning functions.

Download Paper

Summary of the Study

Do Wage Cuts Damage Work Morale? Evidence from a Natural Field Experiment

Employment contracts are often incomplete, leaving many responsibilities subject to workers’ discretion. High work morale is therefore essential for sustaining voluntary cooperation and high productivity in firms. We conducted a field experiment to test whether workers reciprocate wage cuts and raises with low or high work productivity. Wage cuts had a detrimental and persistent impact on productivity, reducing average output by more than 20 percent. An equivalent wage increase, however, did not result in any productivity gains. The results from an additional control experiment with high monetary performance incentives demonstrate that workers could still produce substantially more output, leaving enough room for positive reactions. Altogether, these results provide evidence consistent with a model of reciprocity, as opposed to inequality aversion.

 

Download Paper

The Currency of Reciprocity - Gift-exchange in the Workplace

What determines reciprocity in employment relations? We conducted a controlled field experiment to measure the extent to which monetary and non-monetary gifts affect workers’ performance. We find that non-monetary gifts have a much stronger impact than monetary gifts of equivalent value. We also observe that when workers are offered the choice, they prefer receiving money but reciprocate as if they received a non-monetary gift. This result is consistent with the common saying, “it’s the thought that counts”. We underline this point by showing that also monetary gifts can effectively trigger reciprocity if the employer invests more time and effort into the gift’s presentation.

Download Paper

Featured in Harvard Business Review / Slate, Wall Street Journal, NZZ

Egalitarianism and Competitiveness

No abstract available                                                                        

 

 

Download Paper

Two are better than One! Individuals’ Contributions to 'Unpacked' Public Goods

We experimentally demonstrate how “unpacking” provides a possible approach for mitigating the dilemma
of public goods provision through private contributions. Subjects' total contributions increase when a single
public good is split into two identical public goods.

 

Download Paper