No abstract

We examine whether exposure to a more or less risky environment affects people's subsequent risk-taking behavior. In a laboratory setting, all subjects went through twelve rounds of multiple-price-list decisions between a risky alternative and a safe alternative. In the first six rounds, subjects were randomly assigned to a high-, moderate-, or low-risk environment, which differed in the variances of the lotteries they were exposed to. In the last six rounds, subjects in all treatments made decisions on an identical set of lotteries. We found that subjects who had experienced a riskier environment exhibited a higher degree of risk aversion. Our experimental design allows us to conclude that this effect is driven by the risk environment per se, rather than the realized outcomes of the risk. This finding has important theoretical and policy implications.

No abstract

Contrary to the self-interestedness assumption, numerous economic studies have documented that people are intrinsically honest. However, little is known about this trait's developmental origin. This study examines whether and the extent to which children in early childhood incur the intrinsic lying cost. We modified the commonly used coin-flip task into a child-friendly ball-drawing task with 10 trials and conducted the experiment with 225 child participants aged three to eight years old. We found that-although young children, on average, told two lies in the task (an average winning rate of 71%)-they lied significantly less than the maximum level (i.e., lying 100% of the time). The pattern was largely similar across gender and the age range studied. Furthermore, our child subjects' propensity to lie dropped by approximately 9% when they were randomly assigned to the treatment condition with an increased "perceived" intrinsic cost of lying. Overall, our results align with the innate morality hypothesis: young children, as young as three years old, are willing to give up pecuniary rewards in order to remain honest.

From 1949, China's leaders brought their country through three decades of income and wealth compression, which was followed by more than three decades of sharply rising inequality. What preferences do China's people hold regarding what price (if any) is worth paying for greater equality? We conduct a laboratory decision‐making experiment mimicking aspects of a macro‐political–economic environment, using Chinese undergraduate student subjects. We find that our subjects have qualitatively similar tastes for equality as their counterparts in parallel US and European experiments; for example, most are willing to sacrifice some payment for more equality of earnings among other participants, and their willingness to do this is stronger when inequalities originate randomly versus based on performance. Considering the cases permitting direct comparison between Chinese and US subjects’ choices, redistributive choices tend to be a bit higher in China if the participant pays no direct cost and a bit lower if he or she pays such a cost, but the two distributions of decisions differ significantly in under 14% of conditions. Survey data too suggests preferences for a more equal income distribution in China than in other East Asian countries, suggesting a possible impact of the Chinese Communist Party dominance in education and media.

No abstract

We examine whether prior exposure to environments with a varying degree of risk affects individuals' risk-taking behavior. Using a laboratory experiment, we find that subjects exposed to a high risk environment exhibit higher levels of risk aversion than those who were exposed to a moderate or low risk environment. This effect is not driven by subjects' realized outcomes from the risk. The finding has implications for theoretical models of decision-making under uncertainty, and can speak to a few current policy debates.

The present study investigates the framing effect of tax-transfer systems on work effort decisions. We devised two theoretically equivalent treatments-the redistributive tax treatment and the redistributive transfer treatment-and studied subjects' work effort choices in a novel public goods experiment. We found that subjects chose higher effort levels when redistribution took place via transfers than via taxes. Interestingly, the treatment effect was more pronounced among those with lower cognitive abilities and those who judged the tax-transfer system to be unfair. The results have the potential to offer insight on the debate about the extent to which taxes or transfers should be actively used for redistribution.