Browsing by Author "Johansson-Stenman, Olof"

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A Note on the Risk Behavior and Death of Homo Economicus
(2006) Johansson-Stenman, Olof; Department of Economics
Recent papers by Cox and Sadiraj (2006) and Rubinstein (2006) have pointed out that expected utility theory is more general than has sometimes been acknowledged, and can hence not be refuted as easily by means of experiments. While acknowledging this fact, this note nevertheless demonstrates that typical risk experimental results are impossible to reconcile with conventional dynamic consumption theory under risk, where people are time consistent and integrate all sources of income perfectly.
Animal Welfare and Social Decisions
(2011-01) Aronsson, Thomas; Johansson-Stenman, Olof
This paper analyzes the standard welfare economics assumption of anthropocentric welfarism, i.e., that only human well-being counts intrinsically. Alternatives where animal welfare matters intrinsically are explored theoretically, based on moral philosophical literature, and empirically where the general public‘s ethical preferences are measured through a survey with a representative sample in Sweden. It is concluded that welfare economics should be generalized in order to encompass the idea that animal welfare should sometimes matter intrinsically.
Anonymity, reciprocity, and conformity: Evidence from voluntary contributions to a national park in Costa Rica
(Springer, 2008) Alpizar, Francisco; Carlsson, Fredrik; Johansson-Stenman, Olof; Alpizar, F. Environment for Development Center, Tropical Agricultural and Higher Education Center (CATIE), 7170, Turrialba, Costa Rica
We investigate the role of anonymity, reciprocity, and conformity for voluntary contributions, based on a natural field experiment conducted at a national park in Costa Rica. Contributions made in public in front of the solicitor are 25% higher than contributions made in private. Giving subjects a small gift before requesting a contribution increases the likelihood of a positive contribution. At the same time, the conditional contribution decreases. The total effect of giving a gift is positive but small, and taking the cost of the gift into account, it is far from profitable. When the subjects are told that the typical contribution of others is $2 (a small contribution), the probability of a contribution increases and the conditional contribution decreases, compared with providing no reference information. Providing a high reference level ($10) increases the conditional contributions. Overall, the total effects have the expected signs, although the magnitudes are smaller than what one might have expected based on existing evidence from laboratory experiments.
Anonymity, Reciprocity, and Conformity: Evidence from Voluntary Contributions to a National Park in Costa Rica
(2007-02-21T10:38:55Z) Alpizar, Francisco; Carlsson, Fredrik; Johansson-Stenman, Olof
We investigate the role of anonymity, reciprocity, and conformity for voluntary contributions, based on a natural field experiment conducted at a national park in Costa Rica. Contributions made in public in front of the solicitor are 25% higher than contributions made in private. Giving subjects a small gift before requesting a contribution increases the likelihood of a positive contribution. At the same time, the conditional contribution decreases. The total effect of giving a gift is positive but small, and taking the cost of the gift into account, it is far from profitable. When the subjects are told that the typical contribution of others is $2 (a small contribution), the probability of a contribution increases and the conditional contribution decreases, compared with providing no reference information. Providing a high reference level ($10) increases the conditional contributions. Overall, the total effects have the expected signs, although the magnitudes are smaller than what one might have expected based on existing evidence from laboratory experiments.
Anyone for Higher Speed Limits? - Self-Interested and Adaptive Political Preferences
(2003) Martinsson, Peter; Johansson-Stenman, Olof; Department of Economics
Swedish survey-evidence indicates that variables reflecting self-interest are important in explaining people’s preferred speed limits, and that political preferences adapt to technological development. Drivers of cars that are newer (and hence safer), bigger, and with better high-speed characteristics, prefer higher speed limits, as do those who believe they drive better than average, whereas elderly people prefer lower limits. Furthermore, people report that they themselves vote more sociotropically than they believe others to vote, on average. Self-serving biases are proposed as a bridge between subjectively perceived expressive and sociotropic voting behavior, versus objectively self-interested voting behavior.
Are Most People Consequentialists?
(2010-08) Johansson-Stenman, Olof
Welfare economics relies on consequentialism. Whether a public action is good or bad is then determined by the consequences for people, rather than for example by the extent to which it infringes on others’ rights. Yet, many philosophers have questioned this assumption. The present note presents new survey evidence where a representative sample in Sweden are asked about their ethical perceptions with respect to what matters intrinsically. Overall, people’s perceptions are largely consistent with consequentialism.
Are people inequality averse or just risk averse?
(2001) Johansson-Stenman, Olof; Daruvala, Dinky; Carlsson, Fredrik; Department of Economics
Individuals' preferences for risk and inequality are measured through experimental choices between hypothetical societies and lotteries. The median relative risk aversion, which is often seen to reflect social inequality aversion, is between 2 and 3. We also estimate the individual inequality aversion, reflecting individuals' willingness to pay for living in a more equal society.Left-wing voters and women are both more risk- and inequality averse than others. The model allows for non-monotonic SWFs, implying that welfare may decrease with an individual's income at high income levels. This is illustrated in simulations based on the empirical results.
Are Social Preferences Skin Deep? Dictators under Cognitive Load
(2009-07-03T06:31:24Z) Hauge, Karen Evelyn; Brekke, Kjell Arne; Johansson, Lars-Olof; Johansson-Stenman, Olof; Svedsäter, Henrik
We study the impact of cognitive load in dictator games to test two conflicting views of moral behavior. Are social preferences skin‐deep in the sense that they are the result of humans’ cognitive reasoning while the natural instinct is selfish, or is rather the natural instinct to share fairly while our cognitive capacities are able to adjust moral principles in a self‐serving manner? Some previous studies in more complex settings give conflicting answers, and to disentangle different possible mechanisms we use simple games. We study both charitable giving and the behavior of dictators under high and low cognitive load, where high cognitive load is assumed to reduce the impact of cognitive processes on behavior. In the dictator game we use both a give frame, where the dictator is given an amount and may share some or all of it to a partner, and a take frame, where dictators may take from an amount initially allocated to the partner. The results from four different studies indicate that the effect of cognitive load is small if at all existing.
Are Some Lives More Valuable?
(2003) Martinsson, Peter; Johansson-Stenman, Olof; Department of Economics
A theoretical model of the ethical preferences of individuals is tested by conducting a choice experiment on safety-enhancing road investments. The relative value of a saved life is found to decrease with age, such that the present value of a saved year of life is almost independent of age at a pure rate of time preference of a few percent, and a saved car driver is valued 17-31% lower than a pedestrian of the same age. Moreover, individuals’ ethical preferences seem to be fairly homogenous.
The Behavioural Economics of Climate Change
(2008-05-19T13:42:04Z) Brekke, Kjell Arne; Johansson-Stenman, Olof
This paper attempts to bring some central insights from behavioural economics into the economics of climate change. In particular, it discusses (i) implications of prospect theory, the equity premium puzzle and time inconsistent preferences in the choice of discount rate used in climate change cost assessments, and (ii) the implications of various kinds of social preferences for the outcome of climate negotiations. Several reasons are presented for why it appears advisable to choose a substantially lower social discount rate than the average return on investments. It also seems likely that taking social preferences into account increases the possibilities of obtaining international agreements, compared to the standard model. However, there are also effects going in the opposite direction, and the importance of sanctions is emphasised.
Charity as Income Redistribution: A Model with Optimal Taxation, Status, and Social Stigma
(2019-09) Aronsson, Thomas; Johansson-Stenman, Olof; Wendner, Ronald; Department of Economics, University of Gothenburg
Our framework integrates (i) public and private redistribution, (ii) the warm glow of giving and stigma of receiving charitable donations, and (iii) status concerns emanating from social comparisons with respect to charitable donations and private consumption. Whether charity should be taxed or supported largely depends on the relative strengths of the warm glow of giving and the stigma of receiving charity, respectively, and on the positional externalities caused by charitable donations. In addition, imposing stigma on the mimicker (which relaxes the self-selection constraint) strengthens the case for subsidizing charity. We also consider a case where the government is unable to target the charitable giving through a direct tax instrument, and we examine how the optimal marginal income tax structure should be adjusted in response to charitable giving. Numerical simulations demonstrate that the quantitative effects of the aforementioned mechanisms can be substantial.
Charity, Status, and Optimal Taxation: Welfarist and Non-Welfarist Approaches
(University of Gothenburg, 2021-06) Aronsson, Thomas; Johansson-Stenman, Olof; Wendner, Ronald; Department of Economics
This paper analyzes optimal taxation of charitable giving to a public good in a Mirrleesian framework with social comparisons. Leisure separability together with zero transaction costs of giving imply that charitable giving should be subsidized to such an extent that governmental contributions are completely crowded out, regardless of whether the government acknowledges warm glows of giving. Stronger concerns for relative charitable giving and larger transaction costs support lower marginal subsidies, whereas relative consumption concerns work in the other direction. A dual screening approach, where charitable giving constitutes an indicator of wealth, is also presents. Numerical simulations supplement the theoretical results.
Charity, Status, and Optimal Taxation: Welfarist and Paternalist Approaches
(2019-04) Aronsson, Thomas; Johansson-Stenman, Olof; Wendner, Ronald; Department of Economics, University of Gothenburg
This paper deals with tax policy responses to charitable giving, defined in terms of voluntary contributions to a public good, to which the government also contributes through public revenue; the set of tax instruments contains general, nonlinear taxes on income and charitable giving. In addition to consumption, leisure and a public good, individuals obtain utility from the warm glow of giving and social status generated by their relative contributions to charity as well as their relative consumption compared with others. We analyze the conditions under which it is optimal to tax or subsidize charitable giving and derive corresponding optimal policy rules. Another aim of the paper is to compare the optimal tax policy and public good provision by a conventional welfarist government with those by two kinds of paternalist governments: The first kind does not respect the consumer preferences for status in terms of relative giving and relative consumption, while the second kind in addition does not respect preferences for warm glow of giving. The optimal policy rules for marginal taxation and public good provision are similar across governments, except for the stronger incentive to tax charitable giving at the margin under the more extensive kind of paternalism. Numerical simulations supplement the theoretical results.
Choosing from Behind a Veil of Ignorance in India
(2002) Johansson-Stenman, Olof; Gupta, Gautam; Carlsson, Fredrik; Department of Economics
Social inequality aversion is measured through a veil-of-ignorance experiment with Indian students. The median relative risk aversion is found to be quite high, about 3, and independent caste.
Conspicuous Leisure: Optimal Income Taxation when both Relative Consumption and Relative Leisure Matter
(2009-04-21T07:48:14Z) Aronsson, Thomas; Johansson-Stenman, Olof
Previous studies on public policy under relative consumption concerns have ignored the role of leisure comparisons. This paper considers a two-type optimal nonlinear income tax model where people care both about their relative consumption and their relative leisure. Increased consumption positionality typically implies higher marginal income tax rates for both the high-ability and the low-ability type, whereas leisure positionality has an offsetting role. However, this offsetting role is not symmetric; concern about relative leisure implies a progressive income tax component, i.e., a component that is larger for the high-ability than for the low-ability type. Moreover, leisure positionality does not modify the policy rule for public good provision when the income tax is optimally chosen.
Costs and Benefits of Electric Vehicles - A 2010 Perspective
(2002) Johansson-Stenman, Olof; Carlsson, Fredrik; Department of Economics
This paper undertakes a social cost-benefit analysis regarding an increase in the number of electric vehicles in the Swedish transport sector by year 2010. Battery cars are generally found to be socially unprofitable, even though their private life-cycle costs and external costs are lower than those of petrol cars. One important reason for this is that electric vehicles are heavily ‘subsidised' by having, in comparison with taxes on fossil fuel, a very low electricity tax. ‘Hybrid' cars are more likely to be socially profitable, especially for city-based delivery trucks, which may be both privately and socially profitable without subsidies.
Costs Benefits Rules when Nature Counts
(2006) Johansson-Stenman, Olof; Department of Economics
This paper analyses normative implications of relaxing the conventional welfare economics assumptions anthropocentrism and welfarism, i.e. that only human well-being counts intrinsically, combined with various types of non-selfish individual preferences. Social decision rules are derived for the optimum provision of a public good (environmental quality). It is shown that in several cases analysed, the basic Samuelson rule still holds, in terms of aggregate marginal willingness to pay.
Discounting and Relative Consumption
(2013-03) Johansson-Stenman, Olof; Sterner, Thomas; Dept of Economics, University of Gothenburg
We analyze optimal social discount rates when people derive utility from relative consumption. We compare the social, private, and conventional Ramsey rates. Assuming a positive growth rate, we find that 1) the social discount rate exceeds the private discount rate if the importance of relative consumption increases with consumption and that 2) the social discount rate is smaller than the Ramsey rate given quasi-concavity in own and others’ consumption and risk aversion with respect to others’ consumption. Numerical calculations demonstrate that the latter difference may be substantial and have important implications for long run environmental issues such as global warming.
Do You Enjoy Having More Than Others? Survey Evidence of Positional Goods
(2003) Martinsson, Peter; Johansson-Stenman, Olof; Carlsson, Fredrik; Department of Economics
Although conventional economic theory proposes that only the absolute levels of income and consumption matter for people’s utility, there is much evidence that relative concerns are often important. This paper uses a survey-experimental method to measure people’s perceptions of the degree to which such concerns matter, i.e. the degree of positionality. Based on a representative sample in Sweden, income and cars are found to be highly positional, on average. This is in contrast to leisure and car safety, which may even be completely non-positional.
Does age matter for the value of life? - Evidence from a choice experiment in rural Bangladesh
(2009-10-19T14:07:48Z) Johansson-Stenman, Olof; Mahmud, Minhaj; Martinsson, Peter
Using a random sample of individuals in rural Bangladesh, this paper investigates people’s preferences regarding relative values of lives when it comes to different ages of the individuals being saved. By assuming that an individual has preferences concerning different states of the world, and that these preferences can be described by an individual social welfare function, the individuals’ preferences for life-saving programs are elicited using a pair-wise choice experiment between different life-saving programs. In the analyses, we calculate the social marginal rates of substitution between saved lives of people of different ages. We also test whether people have preferences for saving more life-years rather than only saving lives. In particular, we test and compare the two hypotheses that only lives matter and that only life-years matter. The results indicate that the value of a saved life decreases rapidly with age and that people have strong preferences for saving life-years rather than lives per se. Overall, the results clearly show the importance of the number of life-years saved in the valuation of life.