Does peer group size influence social preferences and risk taking?

This paper examines whether the ex post relative payoffs of peers as well as the size of the peer group impact an agent's willingness to take risks. For example, persons in a flood plain may be less likely to purchase flood insurance if their neighbors also refrain from purchasing. We generalize the Fehr‐Schmidt (1999) model to allow the intensity of the social preferences to vary with the size of the peer group. Our experiment tests whether subjects are more or less likely to choose a lottery over a fixed payment when others have been assigned either the same lottery or the fixed payment. Using both between and within subject designs, we find risk‐taking behaviour is not responsive to the risks faced by others regardless of the size of peer group.     

Worker Absenteeism in Search Equilibrium*

In this paper we introduce a general equilibrium model of search unemployment that incorporates absence from work as a distinct labor force state. Absenteeism is driven by random shocks to the value of leisure that are private information to the workers. Firms maximize profits while recognizing that the compensation package may affect the queue of job applicants and the absence rate. The analysis provides results concerning the effects of social insurance benefits and other determinants of workers' and firms' behavior. The normative analysis identifies externalities associated with firm‐provided sick pay and examines the welfare implications of alternative policies.     

Imitation,Contagion, or Exertion? Using a Tax Reform to Reveal How Colleagues' Sick Leaves Influence Worker Behaviour

We analyse the social interaction effects in sick‐leave behaviour in the workplace, using high‐quality Norwegian matched employer–employee data with detailed individual information on sick leaves during the 2004–2006 period. We find that social interaction effects in sick‐leave behaviour in the workplace do exist, and that the effects are noticeable in size. The strong relationship between the sick‐leave rates among colleagues is not solely the result of contagious diseases, nor is it caused by improved informational quality or by the increased workload for the non‐absent workers. Evidence supports the existence of reciprocal worker behaviour that is unrelated to joint leisure‐seeking activities.     

HORIZONTAL SOCIAL COMPARISONS AND VERTICAL RECIPROCITY IN A PRINCIPAL–MULTI‐AGENT EXPERIMENT

The aim of this note is to investigate whether the incentive mechanism based on reciprocity is still effective in the presence of several agents by exploring a principal–multi‐agent relationship in a gift‐exchange experiment. The results show that horizontal social comparisons between agents can undermine the vertical reciprocity‐driven incentive mechanism. When long‐term relationships or merit procedures are introduced in the experiment, reciprocity becomes effective again.     

ON DETAIL‐FREE MECHANISM DESIGN AND RATIONALITY*

Mechanism design theory has been criticized, because mechanisms depend on the detail of specification and agents’ behaviour relies on strong rationality assumptions. Hence the study of “detail‐free” mechanism design with weak rationality is important as a practical theory. This paper emphasizes that, even if we confine our attention to detail‐free mechanisms with weak rationality, there exists plenty of scope for the development of new and significant ideas. I describe my recent work along these lines, and argue that stochastic decisions work in large double auction environments, and that moral preferences improve the implementability of social choice functions.     

Testing Social Preferences for an Economic “Bad”: An Artefactual Field Experiment*

We test for social preferences over a commodity in an artefactual field experiment using the random price voting mechanism. Subjects are university staff members, and the commodity is water “contaminated” by a sterilized cockroach. Our results suggest that social preferences exist with respect to commodities and “bads”, supporting a more general utility framework for social preferences. Our empirical test allows for the coexistence of three social‐preference models; our results support the models of Fehr and Schmidt (1999) and Charness and Rabin (2002), but not the model of Bolton and Ockenfels (2000). Also, we find that incorporating social preferences improves the efficiency of majority‐rules voting.     

The medical doctors as gatekeepers in the sickness insurance?

Based on a randomized experiment, we estimate effects from notification to medical doctors of tighter monitoring of their Medical Certificates (MCs). Both the time prescribed by the doctor certificates for sick leave (prescribed sick leave) and the impact on the length of the actual sickness absence (actual sick leave) is studied. We find no effect on the total number of prescribed sick leave days. However, we do find an increase in both prescribed and actual sick leave with a 25% work inability. We also find that the notification letter causes an increase in actual sick leave (i.e. the number of reimbursed sick days). We discuss a number of potential explanations for this rather surprising result.     

SOCIAL COMPARISON AND SUBJECTIVE WELL‐BEING: DOES THE HEALTH OF OTHERS MATTER?

The importance of social comparison in shaping individual utility has been widely documented by subjective well‐being literature. So far, income and unemployment have been the main dimensions considered in social comparison. This paper aims to investigate whether subjective well‐being is influenced by inter‐personal comparison with respect to health. Thus, we study the effects of the health of others and relative health hypotheses on two measures of subjective well‐being: happiness and subjective health. Using data from the Italian Health Conditions survey, we show that a high incidence of chronic conditions and disability among reference groups negatively affects both happiness and subjective health. Such effects are stronger among people in the same condition. These results, robust to different econometric specifications and estimation techniques, suggest the presence of some sympathy in individual preferences with respect to health and reveal that other people's health status serves as a benchmark to assess one's own health condition.     

Sickness Absence and Local Benefit Cultures

In many countries, sickness absence financed by generous insurance benefits is an important concern in the policy debate. There are strong variations in absence behavior among local geographical areas. Such variations are difficult to explain in terms of observable socioeconomic factors. In this paper, we investigate whether such variations are related to group effects in the form of social interaction among individuals within neighborhoods. Well‐known methodological problems arise when trying to answer this question. A special feature of our efforts to deal with these problems is that we adopt several alternative approaches to identify group effects. Our study is based on a rich set of Swedish panel data, and we find indications of group effects in each of our approaches.     

Occupational attainment and stratification in China: The interactive effects of social networks and the hukou system

This paper examines the effects of social networks and hukou status on worker’s occupational attainment in China. To identify the potential ranking of different occupations, we consider the use of the stereotype ordered regression model to estimate individual occupational choice. Our results show that social networks play different roles in shaping occupational outcomes for urban and rural workers. In particular, friendship ties significantly improve urban workers’ opportunities in obtaining higher‐ranked occupations; in contrast, kinship ties appear to be more influential for rural migrants, but the effects are limited to the attainment of lower‐ranked occupations. While social contacts from government organizations or state‐owned sectors facilitate urban workers’ attainment of higher‐ranked occupations, similar patterns are not observed among rural workers. We further find that the beneficial effects of social networks or urban hukou identity are stronger for workers who are from less‐developed regions, who work in state‐owned enterprises, or who have a college degree. Decomposition of the wage gap between urban and rural workers suggests that differences in social networks and occupation types, together with hukou discrimination, account for the majority of the current wage inequality.     

Identity,Utility, and Cooperative Behaviour: An Evolutionary Perspective*†

This paper provides an argument for the advantage of a preference for identity‐consistent behaviour from an evolutionary point of view. Within a stylized model of social interaction, it is shown that the development of cooperative social norms is greatly facilitated if the agents possess a preference for identity‐consistent behaviour. As compliance with cooperative norms (in the long run) has a positive effect on the agents’ pay‐offs, it is argued that such a preference is evolutionarily advantageous. Notably, the argument, which assumes that agents always act in accordance with their preferences, also accounts for the cost of those features that are crucial for the selection process.     

The Bourdieusian Conception of Social Capital: A Methodological Reflection and Application

This paper is on social capital and the meaning that Bourdieu has given to this concept in his Notes provisoires, published in 1980. He considered social capital as one of the most important forms of capital, along with economic capital and cultural capital. Even though he did not propose an explicit measure of social capital, so it remained in a conceptual state, he promoted an innovative research programme. Our contribution is to propose a generic method to empirically measure and test hypotheses on social capital, based on Bourdieu's work. We aim at creating an analytical framework that places this concept at the centre of the Bourdieusian theoretical approach. For this purpose, we combine two sociological tools that relate to two different sociological traditions, namely social network analysis and multiple correspondence analyses. Thus, our paper describes the ways to combine field and network analyses, and illustrates this with an empirical study.     

The Impact of Social Comparisons on Reciprocity*

In this paper, we investigate how social comparison information about referent others (i.e., learning what similar others do, and how they are treated) affects reciprocal relationships. Using three‐person gift‐exchange games, we study how employees’ reciprocity towards an employer is affected by pay comparison information (what co‐workers earn) and effort comparison information (how co‐workers perform). We find strong evidence of the effects of effort comparison: employees are more willing to reciprocate by choosing high effort in response to a high wage if they observe others doing so. In our setting, we find somewhat weaker evidence of the effects of pay comparison.     

Rethinking multidimensional poverty through a multi-criteria analysis

The risk of poverty or social exclusion constitutes the pivotal multidimensional indicator of living conditions in the European Union. Nevertheless, it only reports the proportion of individuals at risk and disregards the depth of poverty. The indicator therefore overlooks situations of possible vulnerable groups just above the threshold and is not sensitive to all dimensions in which the individual is at risk. In this paper we propose an alternative multi-criteria based approach that overcomes these problems. Our measure captures information about the level of achievement in each dimension of all persons along the distribution and evaluates to what extent the concurrence of multiple deprivations reinforces their disadvantage. This approach permits diverse ways of aggregation with different degrees of substitutability among the achievements of each dimension according to context-specific social preferences. We illustrate our approach with an empirical analysis of 28 countries using the European Union Statistics on Income and Living Conditions database for 2016. The results reveal that work intensity may be regarded as the most determining factor in analyses of multidimensional poverty across European countries. Our measures unmask how countries with similar proportions of individuals at risk of poverty or social exclusion hide very different conditions of multidimensional poverty and highlight the variety of socioeconomic realities existing behind the dichotomy imposed by the usual ‘at risk of poverty or social exclusion’ rate.     

On representative social capital

This paper analyzes the behavior of subjects randomly drawn from the Dutch population who reveal their capacity to provide and sustain social capital by their propensity to invest and reward investments in an economic experiment. We find that heterogeneity in behavior is characterized by several asymmetries—men, the young and elderly, and low educated individuals invest relatively less, but reward significantly more investments. The age effects are found to corroborate existing findings, whereas those of gender and education do not. Higher expected levels of investments by others are found to have a positive and significant effect on own investments. Finally, a laboratory experiment with student subjects is found to provide a lower bound of the population level of social capital.     

COOPERATION: THE POWER OF A SINGLE WORD? SOME EXPERIMENTAL EVIDENCE ON WORDING AND GENDER EFFECTS IN A GAME OF CHICKEN

Framing has been widely shown to affect decision making. In this paper, we investigate experimentally whether, and to what extent, cooperative behaviour in a Game of Chicken may be impacted by a very basic change in the labelling of the strategies. Our within‐subject experimental design involves two treatments. The only difference between them is that we introduce either a socially‐oriented wording (I cooperate/I do not cooperate) or colours (red/blue) to designate strategies. The level of cooperation appears to be higher in the socially‐oriented context, but only when uncertainty as regards the type of the partner is manipulated, and especially among females.     

Household Finances and Social Interaction: Bayesian Analysis of Household Panel Data

We investigate the relationship between social interaction and household finances using the British Household Panel Survey. We explore the relationship between a wide range of aspects of household finances and social interaction, rather than focusing on one particular facet of household finances, such as the holding of stocks and shares. We develop a Bayesian statistical framework to simultaneously explore both sides of the household balance sheet—liabilities and assets. Additionally, we allow the influence of social interaction on household finances to be time dependent, enabling us to model the effects of social interaction from a dynamic perspective. We also develop a two‐part model to jointly investigate the influence of social interaction on the amount of different types of debt and financial assets held conditional on holding the different types of debt and assets. Our analysis suggests that social interaction is associated with households holding larger amounts of debt and assets.     

Compliance with Endogenous Audit Probabilities

In this paper, we study the effect of endogenous audit probabilities on reporting behavior in a face‐to‐face compliance situation, such as at customs. In an experimental setting in which underreporting has a higher expected payoff than truthful reporting, we find an increase in compliance of about 80 percent if subjects have reason to believe that their behavior towards an officer influences their endogenous audit probability. Higher compliance is driven by considerations about how their own appearance and performance affect their audit probability, rather than by the social and psychological effects of face‐to‐face contact.     

Measuring and Optimizing Portfolio Credit Risk: A Copula‐based Approach*

In this work, we present a methodology for measuring and optimizing the credit risk of a loan portfolio taking into account the non‐normality of the credit loss distribution. In particular, we aim at modelling accurately joint default events for credit assets. In order to achieve this goal, we build the loss distribution of the loan portfolio by Monte Carlo simulation. The times until default of each obligor in portfolio are simulated following a copula‐based approach. In particular, we study four different types of dependence structure for the credit assets in portfolio: the Gaussian copula, the Student's t‐copula, the grouped t‐copula and the Clayton n‐copula (or Cook–Johnson copula). Our aim is to assess the impact of each type of copula on the value of different portfolio risk measures, such as expected loss, maximum loss, credit value at risk and expected shortfall. In addition, we want to verify whether and how the optimal portfolio composition may change utilizing various types of copula for describing the default dependence structure. In order to optimize portfolio credit risk, we minimize the conditional value at risk, a risk measure both relevant and tractable, by solving a simple linear programming problem subject to the traditional constraints of balance, portfolio expected return and trading. The outcomes, in terms of optimal portfolio compositions, obtained assuming different default dependence structures are compared with each other. The solution of the risk minimization problem may suggest us how to restructure the inefficient loan portfolios in order to obtain their best risk/return profile. In the absence of a developed secondary market for loans, we may follow the investment strategies indicated by the solution vector by utilizing credit default swaps.     

MODELLING SOCIAL ENTERPRISES

The majority of research concentrates exclusively on the objectives of governments, profit entities or non‐profit organizations, while a significant number of organizations are hybrids. One form of these hybrids is the social enterprise. This paper theoretically describes social enterprises taking into consideration their main aims. Based on the ‘earned income’ school of thought, the principal‐agent theory and considering the nature of social enterprises’ activities we propose the objective functions of their owners (principals) and managers (agents). The maximization problem of the social enterprise is defined as the weighted average of the utilities of two groups of stakeholders who have an influence on the degree of the realization of the social mission and business orientations. We point out the direction which social enterprises should follow in order to obtain the highest value of their objective functions. The desired state for social enterprises should be one in which they reinvest all surpluses in the process of their mission realization and their profit is slightly higher than the required level by the principal's contract.