Cognitive skills affect economic preferences, strategic behavior, and job attachment

Details

Serval ID
serval:BIB_6947B7C96F7A
Type
Article: article from journal or magazin.
Collection
Publications
Title
Cognitive skills affect economic preferences, strategic behavior, and job attachment
Journal
Proceedings of the National Academy of Sciences
Author(s)
Burks S., Carpenter J., Goette L., Rustichini A.
ISSN
0027-8424
Publication state
Published
Issued date
2009
Peer-reviewed
Oui
Volume
106
Number
19
Pages
7745 - 7750
Language
english
Abstract
Economic analysis has so far said little about how an individual's cognitive skills (CS) are related to the individual's economic preferences in different choice domains, such as risk taking or saving, and how preferences in different domains are related to each other. Using a sample of 1,000 trainee truckers we report three findings. First, there is a strong and significant relationship between an individual's CS and preferences. Individuals with better CS are more patient, in both short- and long-run. Better CS are also associated with a greater willingness to take calculated risks. Second, CS predict social awareness and choices in a sequential Prisoner's Dilemma game. Subjects with better CS more accurately forecast others' behavior and differentiate their behavior as a second mover more strongly depending on the first-mover's choice. Third, CS, and in particular, the ability to plan, strongly predict perseverance on the job in a setting with a substantial financial penalty for early exit. Consistent with CS being a common factor in all of these preferences and behaviors, we find a strong pattern of correlation among them. These results, taken together with the theoretical explanation we offer for the relationships we find, suggest that higher CS systematically affect preferences and choices in ways that favor economic success.
Keywords
Cognitive ability, Discount rate, Prisoner's Dilemma, Risk aversion, Turnover
Web of science
Open Access
Yes
Create date
10/08/2009 13:35
Last modification date
20/08/2019 15:24
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