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The role of trust in promoting economic activity and societal development has received considerable academic attention by social scientists. A popular way to measure trust at the individual level is the so-called "investment game" (Berg, Dickhaut, and McCabe, 1995). It has been widely noted, however, that risk attitudes can also affect decisions in this game, and thus in principle confound inferences about trust. We provide novel evidence, shedding light on the role of risk attitudes for trusting decisions. To the best of our knowledge, our data are the first rigorous evidence that (i) aggregate investment distributions differ significantly between trust and risk environments, and (ii) risk attitudes predict individual investment decisions in risk games but not in the corresponding trust games. Our results are convergent evidence that trust decisions are not tightly connected to a person's risk attitudes, and they lend support to the "trust" interpretation of decisions in investment games. Abstract:The role of trust in promoting economic activity and societal development has received considerable academic attention by social scientists. A popular way to measure trust at the individual level is the so-called "investment game" (Berg, Dickhaut, and McCabe, 1995). It has been widely noted, however, that risk attitudes can also affect decisions in this game, and thus in principle confound inferences about trust. We provide novel evidence, shedding light on the role of risk attitudes for trusting decisions. To the best of our knowledge, our data are the first rigorous evidence that (i) aggregate investment distributions differ significantly between trust and risk environments, and (ii) risk attitudes predict individual investment decisions in risk games but not in the corresponding trust games. Our results are convergent evidence that trust decisions are not tightly connected to a person's risk attitudes, and they lend support to the "trust" interpretation of decisions in investment games.

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Productivity growth has been slow in many continental European countries over the last few decades, especially in comparison with the United States. It has been argued that lack of product market competition and poor corporate governance are two of the main reasons for this phenomenon. However, predictions from theoretical models are far from unambiguous, and empirical evidence is sparse, in particular at the level of individual firms. In this paper, we aim to close this gap with an econometric analysis of firm performance in Germany. Based on a unique panel data set with detailed information on almost 400 manufacturing firms over the 1986-94 period, we find that firms operating in industries which are characterized by more intensive product market competition experience higher rates of productivity growth. We also find weak evidence for the notion that in Germany's bank-based system of internal control, ownership concentration is harmful for productivity growth. Keywords Non-technical summaryProductivity growth has been slow in many continental European countries over the last few decades, especially in comparison with the United States. European countries such as Germany and France have low capital performance as measured by capital productivity and various rates of return. Improving productivity is important not only for shareholder value, but also from a public policy perspective: In many countries, social security systems move away from pay-as-you-go systems to more capital-funded systems, and therefore the rate of return on capital will be even more important as a determinant of future generations' welfare than in the past.It has been argued that lack of product market competition and poor corporate governance are the two main reasons for slow productivity growth in continental Europe. However, predictions from theoretical models are far from unambiguous, and empirical evidence is sparse, in particular at the level of individual firms. This study tries to close this gap with an econometric analysis of firm performance in Germany. Using a panel of almost 400 German manufacturing firms that covers the period 1986-94, we analyze how product market competition and corporate governance affect the growth of total factor productivity.Our empirical approach improves on existing empirical studies on corporate governance in Germany in two important respects. First, the data set consists of listed and non-listed firms which also differ in their legal forms. Hence, our analysis is not restricted to public companies with limited liability whose shares are listed (börsennotierte Aktiengesellschaften). Second, we recognize that product market competition and corporate governance are potentially endogenous. To avoid biased regression results, we use an instrumental variables technique.We find that firms which operate in more competitive product markets have a higher growth of total factor productivity. This suggests that an increase in the intensity of competition should result in productivity improvements. Fro...

Despite its importance for the analysis of life-cycle behavior and, in particular, retirement planning, stock ownership by private households is poorly understood. Among other approaches to investigate this puzzle, recent research has started to elicit private households' expectations of stock market returns. This paper reports findings from a study that collected data over a two-year period both on households' stock market expectations (subjective probabilities of gains or losses) and on whether they own stocks. We document substantial heterogeneity in financial market expectations. Expectations are correlated with stock ownership. Over the two years of our data, stock market prices increased, and expectations of future stock market price changes also increased, lending support to the view that expectations are influenced by recent stock gains or losses.

Early results on the Medicare Part D prescription drug program, from a survey of people age sixty-five and older who were interviewed just before enrollment started and just after it ended, indicate that Medicare has met its target of 90 percent coverage. Enrollment rates in vulnerable subpopulations-poor health, low income, or cognitive impairment-are almost high enough to offset lower rates of other coverage. However, sizable numbers of elderly people remain uncovered, contrary to their self-interest. Seniors give Part D mixed reviews, and majorities are less satisfied with Medicare and with the government as a result of their experience with this program. [Health Affairs 25 (2006): w344-w354; 10.1377/hlthaff.25.w344] E n r o l l m e n t i n t h e f i r s t o u t pat i e n t d ru g coverage benefit in Medicare's history began 1 January 2006, following the passage of the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003. A much-publicized enrollment deadline passed 15 May 2006, after which most seniors face penalties for late enrollment. This paper presents early results on the demographics of enrollment in the Medicare Part D prescription drug program, based on the Retirement Perspectives Survey (RPS) conducted by our research group before and after the enrollment deadline. closed.2 Respondents were asked about their Part D knowledge and intentions in the first interview and about their enrollment-process choices and opinions in the second interview. We present results primarily from a core of 1,571 respondents who were age sixty-five and older in May 2006, were eligible for Part D, were interviewed in both waves, and had no item nonresponse on key variables.The RPS was administered to a panel of subjects enrolled by Knowledge Networks, a commercial survey firm. Panel members were representative of the U.S. resident population in terms of demographics and socioeconomic status, and sample weighting was used to adjust for subsequent nonresponse.3 They were interviewed using supplied Web TV hardware. Respondents are somewhat more computer-literate than the underlying population: About half of the panel members use the Internet, compared with about a third in the corresponding population. 4 Panel members were compensated for participation. In addition to questions about Medicare Part D, each RPS interview contained questions and embedded experiments regarding health status and conditions, long-term care choices, prescription drug use and cost, and attitudes toward risk. 5Additional socioeconomic and demographic variables were provided by Knowledge Networks as background on panel members. We also constructed a simple index of cognitive impairment. Study ResultsOf the 35.84 million people age sixty-five and older who reside in the United States and are eligible for Medicare Part D, data from the Centers for Medicare and Medicaid Services (CMS) suggest that as of 14 June 2006, 24.67 million (68.9 percent) were enrolled in Part D, 8.50 million (23.7 percent) had other credita...

Population ageing and pension reform will have profound effects on international capital markets. In order to quantify these effects, we develop a computational general equilibrium model. We feed this multi-country overlapping-generations model with detailed long-term demographic projections for seven world regions. Our simulations indicate that capital flows from rapidly ageing regions to the rest of the world will initially be substantial, but that trends are reversed when households decumulate savings. We also conclude that closed-economy models of pension reform miss quantitatively important effects of international capital mobility. Copyright (c) The London School of Economics and Political Science 2006.