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The Causal Effect of Cognitive Abilities on Economic Behavior: Evidence from a Forecasting Task with Varying Cognitive Load

Ondrej Rydval

CERGE-EI Working Papers from The Center for Economic Research and Graduate Education - Economics Institute, Prague

Abstract: We identify the causal effect of cognitive abilities on economic behavior in an experimental setting. Using a forecasting task with varying cognitive load, we identify the causal effect of working memory on subjects' forecasting performance, while also accounting for the effect of other cognitive, personality and demographic characteristics. Addressing the causality is important for understanding the nature of various decision-making errors, as well as for providing reliable policy implications in contexts such as student placement, personnel assignment, and public policy programs designed to augment abilities of the disadvantaged. We further argue that establishing the causality of cognitive abilities is a prerequisite for studying their interaction with financial incentives, with implications for the design of efficient incentive schemes.

Keywords: cognitive ability; causality; experiment; financial incentives; performance; working memory (search for similar items in EconPapers)
JEL-codes: C81 C91 D80 D83 J24 (search for similar items in EconPapers)
Date: 2012-04
New Economics Papers: this item is included in nep-exp, nep-for and nep-neu
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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