Search

Although the market is often praised as a wealth-creating coordination system, it is also repeatedly criticized for undermining morality. We empirically examine whether exposure to markets is associated with lower levels of civic morality, i.e. the responsibility and respect of the individual towards society's rules and the public good. Because most prior research lacks generalizability, we scrutinize the relationship between markets and individuals' civic morality in a large set of highly culturally and institutionally diverse countries and regions. Multilevel analyses of cross-country individual-level survey data indicate a robust positive relationship between market exposure and civic morality. We find that subnational regions and countries experiencing an increase in market activity also experience an increase in individuals' civic morality. Our results suggest that the mechanism behind this relation works through the fairness of the market process. We conclude that there is no empirical evidence suggesting that markets undermine civic morality. [ABSTRACT FROM AUTHOR]

The quality and quantity of intergroup contact affects how outgroups are perceived. Positive interaction tends to have a humanizing effect of moral inclusion. Negative interaction instead tends towards dehumanization and moral exclusion. One avenue of intergroup contact that has been empirically underexplored is interaction in a market. Do markets generate moral sympathy, or do they allow us to ignore or deny the moral status of others? We create a measure of moral sentiment that captures the frequency, valence, and type of moral language used about an outgroup. We match our novel sentiment data to dyadic measures of market interaction to test if markets act as a (de)humanizing force. We find a positive relationship between market interaction and the use of (1) moral, (2) virtuous (but not vice), (3) bridging, and (4) bonding language to talk about a contacted outgroup. Our results suggest market interaction has a humanizing effect. [ABSTRACT FROM AUTHOR]

Markets may shape trust and trustworthiness. In this paper, we first report results from a one-shot trust game conducted in a lab-in-the-field experiment with villagers in a rural county in northern China. Experimental results suggest that the experience as online market sellers improves individuals' level of trustworthiness. To provide more rigorous causal evidence and insights on the underlying mechanisms, we then conducted a laboratory experiment, in which subjects played an infinitely repeated market game with asymmetric information; both before and after the market game, subjects made choices in a one-shot trust game. We do not find that the ex-post choices in the trust game differ between those playing the market game and those conducting a real-effort task instead, except that when the market game does not have a reputation system, buyers become less trustworthy afterward—adding a voluntary reputation system similar to the real-world online rating system help mitigate such a detrimental effect. [ABSTRACT FROM AUTHOR]

Recent evidence suggests that stock market experiences, i.e. realized returns, impact subjective expected returns. I bring a model into the laboratory and find that experience-based subjective expected returns can help explain limited stock market participation. In the experiment, the probability of subjects participating in the stock market is increasing in both their subjective expected returns and past realized returns. I find that "learning from experience" generates heterogeneity in subjective expected returns, where subjects who "experience" low returns have lower subjective expected returns than subjects who only observe low returns. This experience effect is asymmetric, where subjects who experience high returns have no statistically significant difference in their subjective expected returns than subjects who only observe high returns. Finally, after a series of low returns, a fraction of subjects leave the stock market indefinitely. [ABSTRACT FROM AUTHOR]

Using data from Urban Household Survey in China, we investigate the persistent effects of tariff reduction due to WTO accession on the wages of labor market new entrants. Our identification strategy exploits variations in the degrees of tariff reduction across industries, and variations in the pre-WTO industry composition of local employment across Chinese prefecture-level cities. We find that cohorts entering the labor market when regional tariffs are reduced tend to have relatively lower wages. Although these adverse effects of tariff reduction on job-entrants' wages become weaker over time, they are still persistent after more than six years of labor market experience. We also find that such effects are particularly strong among workers in the tradable sector and the lower education group. Our estimation results are robust to various alternative measures, specifications and estimation methods. [ABSTRACT FROM AUTHOR]

• We provide a theoretical model of own experience bias. • Individuals are assumed to be biased by own experience of receiving rewards. • Those for whom luck matters in determining rewards are predicted to be most biased. • We run a laboratory experiment to test our predictions. • We find experimental support for own experience bias. We develop a model with which to explore how an individuals own experience in the labor market may influence her assessment of the efforts of other individuals. Specifically, we consider a two stage process in which individuals first learn, through experience, whether effort is rewarded and then subsequently have to estimate the effort of others. We derive a theoretical benchmark based on rational inference and then explore how own experience may lead to systematic bias from this benchmark. Our theoretical results suggest that those who are not rewarded for high effort will underestimate the effort of other individuals while those for whom effort is rewarded will (slightly) overestimate the effort of others. We empirically test and confirm this prediction in the lab. [ABSTRACT FROM AUTHOR]

• A new behavioural model called 'Adaptive loss aversion' is proposed. • In the model, agents have non-equilibrium beliefs and are loss averse when selecting strategies. • When the outcome from playing a strategy is better than anticipated, agents become less loss averse (and vice versa). • An experiment is reported that explores the model's predictions. • Some of the model's main predictions are supported. This paper develops a new behavioral model of how experience affects willingness to trade called adaptive loss aversion. In the model, agents do not recognize that others have different information. Loss aversion makes them cautious. When trading, this protects them from being exploited by better-informed traders. The degree of loss aversion λ is adjusted in response to experience and carries over between games. When outcomes are better than anticipated, λ decreases; when outcomes are worse than anticipated, it increases. A repeated market experiment with symmetric and asymmetric information is used to test the model. The data are noisier than anticipated but some of the model' s main predictions are supported. A structural version of the model is estimated using the experimental data and data from two previous experiments on the winner's curse. A range of other behavioral game theory models is also estimated using the same data and the fit of the models is compared. [ABSTRACT FROM AUTHOR]

We contrast the proposition that markets reveal independently existing preferences with the alternative possibility that they may help to shape them. Using demand-revealing experimental market institutions, we separate the shaping effects of price cues from the effects of market discipline. We find that individual valuations and prevailing prices are systematically affected by both exogenous manipulations of price expectations and endogenous but divergent price feedback. These effects persist to varying degrees, in spite of further market experience. In some circumstances, market experience may actually consolidate them. We discuss possible explanations for these effects of uninformative price cues on revealed preferences. [ABSTRACT FROM AUTHOR]