Cognitive function, numeracy and retirement saving trajectories

This paper examines the extent to which cognitive abilities relate to differences in trajectories for key economic outcomes as individuals move towards and through their retirement. We look at whether differences in baseline numeracy (measured in the English Longitudinal Study of Ageing in 2002) and broader cognitive ability predict the subsequent trajectories of outcomes such as wealth, retirement income and key dimensions of retirement expectations. Those with lower numeracy are shown to have different wealth trajectories both pre- and post-retirement than their more numerate counterparts, but the distributions of retirement expectations and net replacement rates are similar across numeracy groups.     

Cognitive abilities and portfolio choice

We study the relation between cognitive abilities and stockholding using the recent Survey of Health, Ageing and Retirement in Europe (SHARE), which has detailed data on wealth and portfolio composition of individuals aged 50+ in 11 European countries and three indicators of cognitive abilities: mathematical, verbal fluency, and recall skills. We find that the propensity to invest in stocks is strongly associated with cognitive abilities, for both direct stock market participation and indirect participation through mutual funds and retirement accounts. Since the decision to invest in less information-intensive assets (such as bonds) is less strongly related to cognitive abilities, we conclude that the association between cognitive abilities and stockholding is driven by information constraints, rather than by features of preferences or psychological traits.     

Family ties and employment behavior: The role of financial intermediaries

We study the interaction effect of financial intermediaries and family ties on labor participation and employment type in China. Although existing studies examine these effects separately, we investigate the effects of both factors in one model. We give empirical evidence to support earlier arguments that family ties negatively affect labor force participation and positively affect self‐/family‐employment behavior and that financial development positively affects labor force participation. Departing from the extant literature, our results overall indicate a compensating effect of financial intermediaries for family ties in labor participation and employment type. We further argue that there are gender, urban/rural, and age differences in the role of financial intermediaries. The effect of financial intermediaries on the strength of family ties is more relevant for female, rural, and younger people compared to male, urban, and older people.     

Post‐secondary attendance by parental income in the U.S. and Canada: Do financial aid policies explain the differences?

We examine the extent to which tuition and needs‐based aid policies explain important differences in the relationship between family income and post‐secondary attendance relationships between Canada and the U.S. Using data from recent cohorts, we estimate substantially smaller attendance gaps by parental income in Canada relative to the U.S., even after controlling for family background, cognitive achievement, and local‐residence fixed effects. We next document that U.S. public tuition and financial aid policies are actually more generous to low‐income youth than are Canadian policies. Equalizing these policies across Canada and the U.S. would likely lead to a greater difference in income‐attendance gradients.     

Human capital and leadership: the impact of cognitive and noncognitive abilities

We conduct an economic analysis about the impact of human capital on an individual’s potential of becoming a leader based on data from the Programme for the International Assessment of Adult Competencies Survey (PIAAC). Our human capital indicators include not only traditional measures such as education and experience, but also various measures of cognitive and noncognitive ability. Our cognitive ability measures include numeracy, literacy, and problem solving abilities, and noncognitive ability measures include perseverance, motivation to learn, and social trust. We specifically investigate the effect of measurement error and reverse causality on the estimation results. We find that problem-solving ability is the most important in affecting leadership among cognitive ability measures, and perseverance shows the strongest impact among noncognitive ability measures. As a leader supervises more employees, the role of cognitive and noncognitive ability becomes more critical.     

Only the smartest? Motivating job characteristics for all ability levels and their impact on job satisfaction

Using Program for the International Assessment of Adult Competencies data, we explore the relation between cognitive ability, proxied by an explicit test of individual numeracy level and the reported satisfaction of individuals with their job. The paper identifies a relation of individual cognitive ability on job satisfaction interacting with some characteristics of the job related to job complexity, namely job autonomy and learning opportunity in the workplace. We found that individuals with different levels of cognitive ability exhibit different levels of job satisfaction depending on how much learning and job autonomy allows their employment. Individuals with low level of cognitive ability enjoy more their job autonomy than individuals in the top of the ability distribution. The learning effect brings the most profits to the utility of workers from the middle quartiles. Finally, planning is most enjoyed at the top of the distribution. We discuss the implication of these findings from a practical perspective.     

Schooling, Literacy, Numeracy and Labour Market Success

The present paper uses data from the 1996 Australian Aspects of Literacy survey to examine the effects on labour market outcomes of literacy, numeracy and schooling. The survey includes a range of literacy and numeracy variables that are highly intercorrelated. A 'general to specific' approach identifies the most relevant literacy and numeracy variables. Including the others adds little explanatory power. Among males and females separately, approximately half of the total effect of schooling on labour force participation and on unemployment can be attributed to literacy and numeracy (the indirect effect) and approximately half to the direct effect of schooling. There is apparently no indirect effect of labour market experience through literacy and numeracy on participation or unemployment. The direct and total effects of experience are the same. Similarly, the direct and total effects of literacy and numeracy are reasonably similar to each other.     

Predicting restaurant financial distress using decision tree and AdaBoosted decision tree models

The restaurant industry has been facing tough challenges because of the recent economic turmoil. Although different industries face different levels of competition and therefore the likelihood of financial distress can differ for firms in different industries, scant attention has been paid to predicting restaurant financial distress. The primary objective of this paper is to examine the key financial distress factors for publicly traded U.S. restaurants for the period from 1988 to 2010 using decision trees (DT) and AdaBoosted decision trees. The AdaBoosted DT model for the entire dataset revealed that financially distressed restaurants relied more heavily on debt; and showed lower rates of increase of assets, lower net profit margins, and lower current ratios than non-distressed restaurants. A larger proportion of debt in the capital structure ruined restaurants' financial structure and the inability to pay their drastically increased debt exposed restaurants to financial distress. Additionally, a lack of capital efficiency increased the possibility of financial distress. We recommend the use of the AdaBoosted DT model as an early warning system for restaurant distress prediction because the AdaBoosted DT model demonstrated the best prediction performance with the smallest error in overall and type I error rates. The results of two subset models for full-service and limited-service restaurants indicated that the segments had slightly different financial risk factors.     

The lack of loan aversion among Canadian high school students

Evidence is presented on the factors that influence take‐up for postsecondary education financing (loans or grants) for high school students. Results show several factors influence the students' decisions about taking loans or grants but the most prominent influence was the price of educational subsidy. A total of 1,248 high school students across Canada participated. Prices for the grants and loans overlapped substantially in order to more clearly distinguish the impact of loan aversion on the decision to take up financial assistance to pursue PSE. The study featured paid experimental decisions (ranging from $25 to $700 in cash and from $500 to $4,000 in education financing), a numeracy assessment, a student survey and a parental telephone survey. The targeted sample included at‐risk high school students: low SES levels, First Nations and first generation students. Participants were marginally sensitive to the form of financing (grant or loan), with no evidence of systematic loan aversion being detected.     

A story of large landowners and math skills: Inequality and human capital formation in long-run development, 1820–2000

We create a new dataset to test the influence of land inequality on long-run human capital formation in a global cross-country study and assess the importance of land inequality relative to income inequality. Our results show that early land inequality has a detrimental influence on math and science skills even a century later. We find that this influence is causal, using an instrumental variable (IV) approach with geological, climatic and other variables that are intrinsically exogenous. A second major contribution of our study is our assessment of the persistence of numerical cognitive skills, which are an important component of modern human capital measures. Early numeracy around 1820 is estimated using the age-heaping strategy. We argue that countries with early investments in numerical education entered a path-dependency of human capital-intensive industries, including skill-intensive agriculture and services. The combined long-run effects of land inequality and human capital path-dependence are assessed for the first time in this article.     

FAMILY FIRMS,BANK RELATIONSHIPS,AND FINANCIAL CONSTRAINTS: A COMPREHENSIVE SCORE CARD

We examine the effect of financial constraints on firm investment and cash flow. We combine data from the Spanish Mercantile Registry and the Bank of Spain Credit Registry to classify firms according to whether they are family‐owned, not family‐owned, or belong to a family‐linked network of firms and according to their number of banking relations (with none, one, or several banks). Our empirical strategy is structural, based on a dynamic model solved numerically to generate the joint distribution of firm capital (size), investment, and cash flow, both in cross sections and in panel data. We consider three alternative financial settings: saving only, borrowing and lending, and moral hazard constrained state‐contingent credit. We estimate each setting via maximum likelihood and compare across these financial regimes. Based on the estimated financial regime, we show that family firms, especially those belonging to networks based on ownership, are associated with a more flexible market or contract environment and are less financially constrained than nonfamily firms. This result survives stratifications of family and nonfamily firms by bank status, region, industry, and time period. Family firms are better able to allocate funds and smooth investment across states of the world and over time, arguably done informally or using the cash flow generated at the level of the network. We also validate our structural approach by demonstrating that it performs well in traditional categories, by stratifying firms by size and age, and find that smaller and younger firms are more constrained than larger and older firms.     

Financial Liberalization and Institutional Development

This study empirically analyzes the effects of de jure financial openness on institutional quality as captured by indicators on investment risk, corruption level, impartiality of judiciary system, and the effectiveness of bureaucracy. We show that a higher degree of financial openness improves institutional quality mainly by reducing investment risks. We also study the effect of a single liberalization reform. Again, we find evidence for the beneficial impact of financial liberalization with the exception of corruption. We additionally show that the benign consequences of financial opening for the institutional development are even larger if financial liberalization is supported by simultaneous political liberalization, while financial deregulation in former socialist countries tends to worsen institutional quality.     

Dynamic R&D choice and the impact of the firm's financial strength

ABSTRACT

This article investigates how a firm's financial strength affects its dynamic decision to invest in R&D. We estimate a dynamic model of R&D choice using data for German firms in high-tech manufacturing industries. The model incorporates a measure of the firm's financial strength, derived from its credit rating, which is shown to lead to substantial differences in estimates of the costs and expected long-run benefits from R&D investment. Financially strong firms have a higher probability of generating innovations from their R&D investment, and the innovations have a larger impact on productivity and profits. Averaging across all firms, the long-run benefit of investing in R&D equals 6.6% of firm value. It ranges from 11.6% for firms in a strong financial position to 2.3% for firms in a weaker financial position.     

Decision-making Strategies and Performance among Seniors

Using paper and pencil experiments administered in senior centers, we examine decision-making performance in multi-attribute decision problems. We differentiate the effects of declining cognitive performance and changing cognitive process on decision-making performance of seniors as they age. We find a significant decline in performance with age due to reduced reliance on common heuristics and increased decision-making randomness among our oldest subjects. However, we find that increasing the number of options in a decision problem increases the number of heuristics brought to the task. This challenges the choice overload view that people give up when confronted with too much choice.     

The determinants of cognitive and non-cognitive educational outcomes: empirical evidence in Spain using a Bayesian approach

This article aims to extend the literature about the role played by socio-economic and family background in educational outcomes by comparing the determinants of two different dimensions of educational output: academic achievement and non-cognitive traits. To do this, we explore the information provided by a self-report survey developed specifically for the purpose of this research. This will provide us with an innovative measure of non-cognitive performance based on particular personal traits, such as responsibility, effort, motivation and critical capacity, as well as a common measure of cognitive proficiency. We use a Bayesian approach to estimate the potential influence of multiple individual and family variables on both dimensions of educational output. From our results, we find that, despite some similarities, there are several important divergences with regard to some socio-economic variables that have been traditionally considered to be the most influential determinants of academic achievement which do not appear to have a significant impact on non-cognitive outcomes.     

从认知科学到经济学:情绪介入经济决策的内在机理研究

认知科学中情绪研究的兴起和发展改变了人们对情绪介入经济决策的传统认识。文章在梳理认知科学关于情绪介入决策的基础上,从权变的视角分析了情绪介入决策的权变因素,并阐述了认知科学对情绪介入经济决策研究的渗透和影响。文章认为认知科学对经济学的影响表现为:在研究视角上,可以从认知科学的信息加工视角理解情绪介入经济决策的内在机制;在研究层次上,经济决策的研究从行为层进入到认知心理层和脑神经层;在研究方法上,认知科学的行为实验和脑功能成像技术等方法被运用到经济决策的研究中;在研究模型上,经济学家发展了一些基于具体情绪的决策模型。文章在认知科学的基础上构建了经济学情绪—理性互动决策的概念模型。     

市场微观结构视角的公司财务研究前沿综述

以往一直处于平行发展状态的市场微观结构理论和公司财务学近来出现了交叉融合的趋势,且这一视角的研究将随着我国股权分置改革的完成而变得日趋重要。文章系统回顾了市场微观结构中的两个重要研究主题股票流动性和信息不对称对公司财务行为影响的学术前沿动态,具体包括股票流动性和信息不对称对资产定价、融资决策、投资决策和公司治理等方面影响的文献。文章在对这些文献做出回顾与评述的基础上进一步指出了未来的研究方向。     

Hospital competition,spillovers and provision of uncompensated care

Using data for California from 2005 until 2010, we investigate to what extent market competition and the presence of non-profits in the area may play a role in equilibrium uncompensated care (UC) levels, allowing those effects to differ according to the hospital’s ownership type. Previous studies have not explored the potential spillover effects from non-profit hospitals into the hospital decision of UC provision. We find evidence that regions with more non-profits experienced larger increases in UC levels, and even more in less concentrated markets. Our results also indicate that UC provision by for-profit hospitals decreases the larger the presence of non-profits in the region, and this effect is magnified when competition is more intense. We, therefore, find no positive spillover effects of non-profits into the hospital decision of UC provision, which may help us to understand the recent trends in UC levels.     

Dynamics of social factors in technological substitutions

Diffusion models of technological innovations are often based on an epidemic structure which has a good fit to historical data but whose communication assumptions lack explanatory power. They assume a simplified decision process, uniform decision criteria across adopters categories, and a fully interconnected social structure. The objective of this paper is to show that the dynamics of social factors during technological substitutions have significant effects on substitution patterns. The success of a paradigmatic shift is not only a function of technological characteristics but also depends on change agents and many social dynamics. Such complexity requires analysis at several levels of granularity. We start with cognitive processes at the individual level using concepts from cognitive psychology and decision making under uncertainty and then move to interpersonal communications at the aggregate social level. We show that population heterogeneity generates different decision criteria and a social topology which greatly affect perceptions and the formation of expectations. The structure of interpersonal networks also explains how the relevance and credibility of information impact the critical mass dynamics of technology adoption. A more complete model accounting for social interactions provides a useful framework for understanding complex substitution patterns and reducing the risk of misreading the market.     

Effect Of Liquidity On Firms' R&D Spending

The effect of firms financial condition on their R&D investment is explored using a relatively long panel data set for five high-technology industries. We find that financial condition, whether measured as cash flow, the stock of liquid assets or the ratio of liquid assets to current liabilities, does affect the R&D spending of small firms. The effect persists after controlling for unobserved permanent firm effects, and the pattern of significance of lagged effects supports the interpretation of causality running from liquidity to R&D. For larger firms, there is no evidence of such an effect. Using these data, we cannot say whether the absence of an effect in larger firms results from better access to capital markets or from higher adjustment costs in R&D.