Current Research

Play Stupid Games, Win Stupid Prizes

(Jointly with Katharina Hartinger)

We use slot machine games to study economic decision-making in complex high-uncertainty environments. Despite monetary stakes, roughly 20 percent of study participants adopt a non-expected payoff maximizing strategy tied to the game’s entropy. This playful-exploratory approach leads to suboptimal game switching behavior compared to an optimal choice in the Bayesian multi-armed bandit model. We explain this by a model framework in which agents have preference over a rational and a curiosity-driven perspective. A set of treatments capture and disentangle this deliberate rationality-curiosity trade-off: By changing key game features, such as the stakes, we shock the relative utility gain of curious behavior. By offering additional, albeit payoff-neutral, choices, we allow players to explore within the payoff-maximizing strategy. Comparing in-game behavior to the predictions, we find that a significant share of players choose to alter their choices. Our new approach contributes to a better understanding of how economic agents deal with unusual, high-uncertainty environments—which applies to a broader context of stock market trading and gambling. (JEL D83, D91, G40) [Youtube]

Learning by Problem-Solving

(Jointly with Peer Ederer and Ljubica Nedelkoska)

The standard Mincer model does not account for large differences in earnings across occupations. We present an alternative learning-by-doing model that relates wages and skill development to the level of job complexity of a worker. Using administrative data on German labour market entrants, we find that wage growth is positively related to job complexity and negatively related to the initial level of skill. We calibrate the model and show that workers in highly complex occupations acquire twice as much human capital throughout life compared to workers in simple occupations. The results suggest that learning-by-doing is a far more important earnings determinant than investment in education and training that have been the focus of the literature. (JEL J24, J31, D83) [SSRN]

International Emigrant Selection on Occupational Skills

(Jointly with Jens Ruhose, Simon Wiederhold, and Miguel Flores)

We present the first evidence on the role of occupational choices and acquired skills for migrant selection. Combining novel data from a representative Mexican task survey with rich individual-level worker data, we find that Mexican migrants to the United States have higher manual skills and lower cognitive skills than non-migrants. Results hold within narrowly defined region-industry-occupation cells and for all education levels. Consistent with a Roy/Borjas-type selection model, differential returns to occupational skills between the United States and Mexico explain the selection pattern. Occupational skills are more important to capture the economic motives for migration than previously used worker characteristics. (JEL F22, O15, J61, J24) [DOI]