Multiplicative growth processes that are subject to random shocks often have a skewed distribution of outcomes. In a number of incentivized laboratory experiments we show that a large majority of participants either strongly underestimate skewness or ignore it completely. Participants...

Multiplicative growth processes that are subject to random shocks often have a skewed distribution of outcomes. A simple laboratory experiment shows that participants either strongly underestimate skewness or ignore it completely. The participants' choices reveal bounds on their subjective...

We provide laboratory evidence that people neglect skewness resulting from compound shocks.

In many economic contexts, an elusive variable of interest is the agent's expectation about relevant events, e.g. about other agents' behavior. Recent experimental studies as well as surveys have asked participants to state their beliefs explicitly, but little is known about the causal relation...

Good decision-making often requires people to perceive and handle a myriad of statistical correlations. Notably, optimal portfolio theory depends upon a sophisticated understanding of the correlation among financial assets. In this paper, we examine people's understanding of correlation using a...

We analyze empirically the optimal design of social insurance and assistance programs when families obtain insurance by making labor supply choices for both spouses. For this purpose, we specify a structural life-cycle model of the labor supply and savings decisions of singles and married...

In this paper we empirically derive the welfare effects of a shift from joint taxation with full income splitting to a revenue neutral system of individual taxation in Germany. For the empirical welfare evaluation we estimate the preference heterogeneity in the population and use normative...

Parental leave and subsidized child care are prominent examples of family policies supporting the reconciliation of family life and labor market careers for mothers. In this paper, we combine different empirical strategies to evaluate the employment effects of these policies for mothers in...

This paper extends previous research about the determinants of reservation wages by analysing the effect of progressive income taxation on the ratio between reservation and net market wages. Based on micro data for Germany (SOEP) we show that joint income taxation in Germany which discriminates...

In the year 2000, the German government passed the most ambitious tax reform in post-war German history aiming at a significant tax relief for households. One central aim of this tax reform was to improve work incentives and, thereby, foster employment. In this paper, I estimate an intertemporal...