25 Years IWH

The Impact of Institutions and Social Norms on Preferences and Behavior

This research group belongs to the IWH Research Cluster Institutions and Social Norms. Research in this group is based on several strands of literature as financial literature, social concerns and comparisons, or entrepreneurship. Work in this group contributes to the existing literature in several respects. First, we shed light on the decision to invest in financial literacy. This decision could be a function of the availability and degree of sophistication of financial markets. Second, we challenge the assumption on stable preferences (as willingness to take risks) in the decision process of becoming and staying self-employed. We conjecture that experiencing self-employment affects an individual’s attitudes and leads to a shift in the attitudes. Third, we combine these strands of literature. Thereby we extend the existing financial literacy research, which primarily focuses on financial decision making, by analyzing the role of financial literacy in becoming an entrepreneur and its impact on entrepreneurial survival. Fourth, we bring social comparisons into economic analysis when considering political attitudes, namely attitudes towards foreigners, mergers of populations, or migration.

Research Cluster
Institutions and Social Norms

Your contact

Dr Walter Hyll
Dr Walter Hyll
Mitglied - Department Structural Change and Productivity
Send Message +49 345 7753-850

People

Research Affiliates

Refereed Publications

cover_applied-economics-letters.jpg

On the Simultaneity Bias in the Relationship Between Risk Attitudes, Entry into Entrepreneurship and Entrepreneurial Survival

Matthias Brachert Walter Hyll Mirko Titze

in: Applied Economics Letters , No. 7, 2017

Abstract

We consider the simultaneity bias when examining the effect of individual risk attitudes on entrepreneurship. We demonstrate that entry into self-employment is related to changes in risk attitudes. We further show that these changes are correlated with the probability to remain in entrepreneurship.

read publication

Informal Social Networks and Spatial Mobility

Peter Bönisch Lutz Schneider

in: Post-Communist Economies , 2010

Abstract

Individuals’ preferences in transition regions are still shaped by the former communist system. We test this ‘communist legacy’ hypothesis by examining the impact of acculturation in a communist regime on social network participation and, as a consequence, on preferences for spatial mobility. We focus on the paradigmatic case of Eastern Germany, where mobility intentions seem to be substantially weaker than in the Western part. Applying an IV ordered probit approach we first find that Eastern people acculturated in a communist system are more invested in locally bounded informal social capital than Western people. Second, we confirm that membership in such locally bounded social networks reduces the intention to move away. Third, after controlling for the social network effect the mobility gap between East and West is substantially reduced. Low spatial mobility of the Eastern population, we conclude, is to an important extent attributable to a social capital endowment characteristic of post-communist economies

read publication

The Social Capital Legacy of Communism-results from the Berlin Wall Experiment

Peter Bönisch Lutz Schneider

in: European Journal of Political Economy , No. 32, 2013

Abstract

In this paper we establish a direct link between the communist history, the resulting structure of social capital, and attitudes toward spatial mobility. We argue that the communist regime induced a specific social capital mix that discouraged geographic mobility even after its demise. Theoretically, we integrate two branches of the social capital literature into one more comprehensive framework distinguishing an open type and a closed type of social capital. Using the German Socio-Economic Panel (GSOEP) we take advantage of the natural experiment that separated Germany into two parts after the WWII to identify the causal effect of social capital on mobility. We estimate a three equation ordered probit model and provide strong empirical evidence for our theoretical propositions.

read publication

Gauging the Potential for Social Unrest

Walter Hyll Oded Stark Doris A. Behrens

in: Public Choice , 2010

Abstract

It stands to reason that social unrest does not erupt out of the blue. Although there are a great many reasons why social dismay might descend into social disorder, only few yardsticks or indices can plausibly be used to gauge the potential for social unrest (PSU). If policy makers want to undertake public action to prevent social dismay escalating into social disruption, they obviously need to draw on practical sensors. This paper assesses critically the adequacy of two such measures, the polarization (P) index, and the total relative deprivation (TRD) index. The paper proposes a tentative guide to selecting between these two measures. A review of three stylized scenarios suggests that, where income redistributions reduce the number of distinct income groups, and when each group is characterized by a strong sense of within-group identity, the P index surpasses the TRD index as a basis for predicting PSU. When the within-group identification is weak, however, it is better to use the TRD index to predict PSU.

read publication

Relative Deprivation and Migration Preferences

Walter Hyll Lutz Schneider

in: Economics Letters , No. 2, 2014

Abstract

In this letter, we overcome the existing shortages with respect to the assignment of individuals to reference groups and are the first to show that individual aversion to relative deprivation plays a decisive role in shaping migration preferences.

read publication

Working Papers

Cover_IWH-Discussion-Papers_2016.jpg

On the Stability of Preferences: Repercussions of Entrepreneurship on Risk Attitudes

Matthias Brachert Walter Hyll

in: IWH Discussion Papers , No. 5, 2014

Abstract

The majority of empirical studies make use of the assumption of stable preferences in searching for a relationship between risk attitude and the decision to become and stay an entrepreneur. Yet empirical evidence on this relationship is limited. In this paper, we show that entry into entrepreneurship itself plays a decisive role in shaping risk preferences. We find that becoming self-employed is indeed associated with a relative increase in risk attitudes, an increase that is quantitatively large and significant even after controlling for individual characteristics, different employment status, and duration of entrepreneurship. The findings suggest that studies assuming that risk attitudes are stable over time suffer from reverse causality; risk attitudes do not remain stable over time, and individual preferences change endogenously.

read publication

Cover_IWH-Discussion-Papers_2016.jpg

Municipality Size and Efficiency of Local Public Services: Does Size Matter?

Peter Bönisch Peter Haug Annette Illy L. Schreier

in: IWH Discussion Papers , No. 18, 2011

Abstract

Similarly to western Germany in the 1960s and 1970s, the eastern part of Germany has experienced a still ongoing process of numerous amalgamations among counties, towns and municipalities since the mid-1990s. The evidence in the economic literature is mixed with regard to the claimed expenditure reductions and efficiency gains from municipal mergers. We therefore analyze the global efficiency of the municipalities in Saxony-Anhalt, for the first time in this context, using a double-bootstrap procedure combining DEA and truncated regression. This allows including environmental variables to control for exogenous determinants of municipal efficiency. Our focus thereby is on institutional and fiscal variables. Moreover, the scale efficiency is estimated to find out whether large units are necessary to benefit from scale economies. In contrast to previous studies, we chose the aggregate budget of municipal associations (“Verwaltungsgemeinschaften”) as the object of our analysis since important competences of the member municipalities are settled on a joint administrative level. Furthermore, we use a data set that has been carefully adjusted for bookkeeping items and transfers within the communal level. On the “eve” of a mayor municipal reform the majority of the municipalities were found to have an approximately scale-efficient size and centralized organizational forms (“Einheitsgemeinden”) showed no efficiency advantage over municipal associations.

read publication

cover_DP_2016-12.jpg

Social Comparisons and Attitudes towards Foreigners. Evidence from the ‘Fall of the Iron Curtain’

Walter Hyll Lutz Schneider

in: IWH Discussion Papers , No. 12, 2016

Abstract

We exploit the natural experiment of German re-unification to address the question whether distress from social (income) comparisons results in negative attitudes towards foreigners. Our empirical approach rests upon East German individuals who have West German peers. We use the exogenous variation of wealth of West German peers shortly after the fall of the Berlin Wall as an instrument to identify the effect of distress from social comparisons on East Germans’ attitudes. We find robust evidence that East Germans expose strong negative attitudes towards foreigners, particularly from low-wage countries, if they worry about their economic status compared to better-off peers.

read publication

cover_DP_2016-21.jpg

Social Distress and Economic Integration

Walter Hyll Lutz Schneider

in: IWH Discussion Papers , No. 21, 2016

Abstract

We analyze whether social distress from income comparisons affects attitudes towards the integration of economies. Using Germany’s division as natural experiment, we find that East Germans’ feelings of relative deprivation with respect to better-off West Germans led to significantly more support for the upcoming German re-unification.

read publication

Cover_IWH-Discussion-Papers_2016.jpg

The Causal Effect of Watching TV on Material Aspirations: Evidence from the “Valley of the Innocent”

Walter Hyll Lutz Schneider

in: IWH Discussion Papers , No. 8, 2012

Abstract

The paper addresses the question of whether TV consumption has an impact on material aspirations. We exploit a natural experiment that took place during the period in which Germany was divided. Owing to geographical reasons, TV programs from the Federal Republic of Germany could not be received in all parts of the German Democratic Republic. Therefore, a natural variation occurred in exposure to West German television. We find robust evidence that watching TV is positively correlated with aspirations. Our identification strategy implies a causal relationship running from TV to aspirations. This conclusion resists various sets of alternative specifications and samples.

read publication
Mitglied der Leibniz-Gemeinschaft LogoTotal-Equality-LogoWeltoffen Logo