The “Economics and Policy Workshop” is a monthly informal work-in-progress workshop co-organized by ISEG and Nova SBE, held on the second Friday of each month at 5pm, alternating the host institution.

The 8th of June at 5pm, we will have the third edition of the workshop. This time at ISEG and there will be two presentations:

   –  Alexander Coutts (Nova SBE) – “Performance Beliefs and Allocation of Teamwork: An Experiment” (Joint with Leonie Gerhards, Zahra Murad)

Abstract: A growing body of evidence suggests that individuals are on average overconfident about their ability, affecting their decisions related to career choice and finances, among others. We consider implications for an important but understudied environment: decision making in groups. In our setting, output in two-person teams depends on the ability of each member, and individuals must choose how much to delegate between themselves and their teammate. Moving beyond one-dimensional updating, we consider learning when feedback involves aggregated team outcomes, a two-dimensional uncertainty problem. In an experiment, we find that individuals are overconfident, and attribute team feedback in different ways to themselves and their teammate. In particular, they over-attribute positive feedback to themselves, while significantly under-weighting negative feedback in general. As an intuitive control, we examine how a third party updates about a different two-person team. In this control, we find no evidence of differential attribution of feedback among team members, and responses to positive and negative feedback are balanced. We conclude by noting that overconfidence and biases in updating lead to inefficient delegation in teams, and that these commonplace environments and associated feedback structures may impede learning and lead to the persistence of overconfidence.

   – Catarina Alvarez (Nova SBE) – “Property Tax Capitalization: Evidence from a Reform in Portugal” (Joint with João Pereira dos Santos)

Abstract: Tax capitalization theory predicts that a lower property tax payment leads to higher housing prices. However, the empirical evidence is scarce and one needs to consider endogeneity concerns when testing this hypothesis. We tackle these issues by exploiting a quasi-natural experiment: an unexpected reduction in the upper bound of the Portuguese property tax rate for urban dwellings in 2008. We rely on a rich dataset on all mainland municipalities that includes demographic, economic, and political variables for 2004-2011 to implement a difference-in-differences approach. We find that municipalities who were forced to decrease the property tax rate saw a increase in mean real estate values vis-à-vis the comparison group. An analysis of rural dwellings shows no impact of the reform in this type of properties. Our findings suggest that buyers take into consideration the lower costs of owning the house which are reflected in a market price increase with the net present value of the tax reduction.

Location: ISEG – Quelhas Building, room Santander.


Previous Sessions:

  1. At ISEG: Susana Peralta (Nova SBE) – “Who Seeks Re-Election: Local Fiscal Restraints and Political Careers.”
  2. At Nova  SBE: Joana Pais (ISEG) – “Decentralized Matching Markets With(out) Frictions: A Laboratory Experiment” – and Ana Gouveia (Banco de Portugal and Nova SBE) – “Fear the walking dead – zombie firms, spillovers and exit.”