Economics and Psychology RSVP Reminder

Further to the post below, spaces for Professor Laibson's seminar are filling up so please reply to geary@ucd.ie if you intend to come along. In the highly likely event of the room being full, only those who have replied will be admitted.

It pays not to know your colleagues' pay

People like you get on my nerves. That is, if you are paid more than I am. And if we work together. Apart from that you're fine. This is on the basis of this recent NBER paper which looks at how work satisfaction is diminished when people find out how much more their colleagues are paid. Knowing how much less some colleagues are paid on the other hand doesn't matter. So there is envy but no smugness. That's something I suppose. Sometimes a little knowledge is a dangerous thing.

Inequality at Work: The Effect of Peer Salaries on Job Satisfaction
David Card, Alexandre Mas, Enrico Moretti, Emmanuel Saez

Economists have long speculated that individuals care about both their absolute income and their income relative to others. We use a simple theoretical framework and a randomized manipulation of access to information on peers' wages to provide new evidence on the effects of relative pay on individual utility. A randomly chosen subset of employees of the University of California was informed about a new website listing the pay of all University employees. All employees were then surveyed about their job satisfaction and job search intentions. Our information treatment doubles the fraction of employees using the website, with the vast majority of new users accessing data on the pay of colleagues in their own department. We find an asymmetric response to the information treatment: workers with salaries below the median for their pay unit and occupation report lower pay and job satisfaction, while those earning above the median report no higher satisfaction. Likewise, below-median earners report a significant increase in the likelihood of looking for a new job, while above-median earners are unaffected. Our findings indicate that utility depends directly on relative pay comparisons, and that this relationship is non-linear.

David Laibson: Natural Expectations and Macroeconomic Fluctuations

David Laibson from Harvard University will be giving the keynote address at the upcoming conference on Economics and Psychology, to be held in the UCD Research Building on November 23rd. At the event, Laibson is set to speak on the topic of "Natural Expectations and Economic Behavior". For readers who want a taste in advance, there may be similar grounded covered in a paper by Laibson forthcoming in the Journal of Economic Perspectives: "Natural Expectations and Macroeconomic Fluctuations".

Peer effects and fitness

This paper addresses whether fitness is contagious arising from recent claims that such peer or contagion effects may partly explain the increase in obesity. It is worth noting that the data is drawn from students at the US Air Force Academy, a very selective institution with a generally pretty fit bunch of people. It seems doubtful that this data will allow one to identify anything about obesity in the population.

Is Poor Fitness Contagious? Evidence from Randomly Assigned Friends
Scott E. Carrell, Mark Hoekstra, James E. West
NBER w16518
The increase in obesity over the past thirty years has led researchers to investigate the role of social networks as a contributing factor. However, several challenges make it difficult to demonstrate a causal link between friends’ physical fitness and own fitness using observational data. To overcome these problems, we exploit data from a unique setting in which individuals are randomly assigned to peer groups. We find statistically significant peer effects that are 40 to 70 percent as large as the own effect of prior fitness scores on current fitness outcomes. Evidence suggests that the effects are caused primarily by friends who were the least fit, thus supporting the provocative notion that poor physical fitness spreads on a person-to-person basis.

Behavioural Economics, Technology and Mandatory Attendance Policies for College Students

Attendance is voluntary in many college classes, primarily because of the difficulty in taking attendance on a regular basis, but also because of the view that students should have some autonomy in determining the manner in which they engage with academic material. Mandatory attendance policy becomes more of an issue, however, where there is a 'professional' element to a programme. In nursing, for example, there is a high minimum attendance stipulated by the Irish Nursing Board (2005): students must attend 80% of a minimum of 1,533 hours.

There may also be outcomes other than academic achievement which have an important relationship with students’ lecture attendance. A recent report from the institutional research office at UCD has recommended that mandatory attendance policy could be one mechanism to reduce student drop-out (Blaney and Mulkeen, 2009): 'Student Retention in a Modular World - A Study of Retention of UCD Entrants: 1999-2007'. In addition, I recently mentioned on the blog that Irish colleges may soon be offered financial 'incentives' to meet targets in areas such as the retention of students and the rate of course completion. "If they fail to meet these targets, they will face financial penalties." So there are plenty of reasons to care about students' attendance.

There is much debate on what incentives or penalties are appropriate in relation to mandatory attendance policies. This is because penalising students for not showing up can be seen as double jeopardy: they would be punished by lower test scores in addition to a lower attendance score. While some instructors may dislike mandatory attendance policies because they can be a lot of work to enforce, there are recent technological advances such as “dibbers” (used at the Lancaster University geography department) or “clickers” (Hoekstra, 2008) which substantially ease the burden of collecting attendance data. Smart-card technology is available explicitly for the use of measuring student attendance; the TDS Student Attendance Monitoring Solution is currently being used at DCU. There are even new electronic systems which are being used to detect the ID cards students are carrying as they enter classrooms at Arizona University.

A backlash to all of this emerged this year in the Guardian newspaper, with the predictable question being posed: Is this new development necessary documentation or 'Orwellian' surveillance? One comment reads: "Why should the university care whether students attend a lecture or not? By the time a student reaches the university, they should be responsible for their own schedule and actions. Seems to me to be a technological solution to a non-problem." Analogies can be drawn here with the libertarian paternalism debates in public behavioural economics. Liam went through these recently on the blog. Keeping retention and graduation rates high is a major priority for many universities, but are the measures described above too extreme?

UCD Attendance Survey

A short while ago I posted about lecture attendance at Irish universities. Recent research by myself and others from Geary has shown that approximately 12% of Irish university students claim to attend all of their lectures. Overall, the mean-level of percentage lectures attended is 83% in Round 2 of the Irish Universities Study, and 84% in Round 3. This is a self-reported behaviour, and one that is subject to much comparison of anecdote amongst academic instructors. Furthermore, there is reasonable ground to suspect self-reported lecture attendance to be over-stated due to the phenomenon of social desirability bias. Social desirability bias is a term used to describe the tendency of respondents to reply in a manner that will be viewed favourably by others; see Bound et al. (2001) on Measurement Error in Surveys for a discussion (Handbook of Econometrics: Vol. 5).

While benchmarking against official data is difficult in the case of lecture attendance, a data-comparison can be made with a comprehensive attendance survey (measured by head-count) that was conducted at UCD during the academic year 2008/09. Under the guidance of Gabrielle Kelly (2010), students in an undergraduate Survey Sampling class carried out a survey to estimate the attendance rate at lectures in science modules in UCD. Only first-years in the UCD College of Engineering, Mathematical and Physical Sciences and the UCD College of Life Science were included (this was due to student drop-out in first-year being prevalent in these colleges). The overall attendance rate was 47.3% (+ 4.4%). However, there is also a (statistically significant) decrease in attendance rate as class size increases. The figure below (taken from the report on the UCD Attendance Survey; 2009) shows a plot of attendance rate vs. enrolment. The higher attendance rates between 70% and 80% occurred for smaller class sizes of between 30 and 160, whereas the lower rates of 15% to 35% occurred for larger class sizes of between 185 and 485.


It should be noted that there are some instances of attendance rates above 80% (in the UCD Attendance Survey), which is close to the mean-level of percentage lectures attended in Rounds 2 and 3 of the Irish University Study. The Irish Universities Study includes students from all courses but the UCD Attendance Survey only includes students enrolled in STEM (science, technology, engineering and maths) courses. These STEM courses have a greater amount of lectures to attend, which could possibly result in lower levels of attendance (compared to non-STEM courses). The above consideration would lead one to expect a higher level of percentage lectures attended in the Irish University Study, compared to the UCD Attendance Survey.

In relation to potentially unresolved concerns following from the comparison of anecdote amongst academic instructors, it should also be noted that students may be attending more of their lectures in the recession than they used to beforehand. University students in the UK study for two hours and 12 minutes more (per week) now than they did two years ago (in 2007), according to the Higher Education Policy Institute (2009). Given lower levels of labour demand in the part-time jobs market, there is certainly less opportunity for students to allocate their time to work (i.e. diminished opportunity-cost of study-time). In addition, the evolving crisis in the graduate labour market may motivate students to be more patient; and achieve higher academic standards (1 in 3 men under the age of 25 are currently unemployed in Ireland).