SEEKING CULTURAL FAIRNESS IN A MEASURE OF RELATIONAL REASONING

Relational reasoning, or the ability to identify meaningful patterns within any stream of information, is a fundamental cognitive ability associated with academic success across a variety of domains of learning and levels of schooling. However, the measurement of this construct has been historically problematic. For example, while the construct is typically described as multidimensional—including the identification of multiple types of higher-order patterns—it is most often measured in terms of a single type of pattern: analogy. For that reason, the Test of Relational Reasoning (TORR) was conceived and developed to include three other types of patterns that appear to be meaningful in the educational context: anomaly, antinomy, and antithesis. Moreover, as a way to focus on fluid relational reasoning ability, the TORR was developed to include, except for the directions, entirely visuo-spatial stimuli, which were designed to be as novel as possible for the participant. By focusing on fluid intellectual processing, the TORR was also developed to be fairly administered to undergraduate students—regardless of the particular gender, language, and ethnic groups they belong to. However, although some psychometric investigations of the TORR have been conducted, its actual fairness across those demographic groups has yet to be empirically demonstrated. Therefore, a systematic investigation of differential-item-functioning (DIF) across demographic groups on TORR items was conducted. A large (N = 1,379) sample, representative of the University of Maryland on key demographic variables, was collected, and the resulting data was analyzed using a multi-group, multidimensional item-response theory model comparison procedure. Using this procedure, no significant DIF was found on any of the TORR items across any of the demographic groups of interest. This null finding is interpreted as evidence of the cultural-fairness of the TORR, and potential test-development choices that may have contributed to that cultural-fairness are discussed. For example, the choice to make the TORR an untimed measure, to use novel stimuli, and to avoid stereotype threat in test administration, may have contributed to its cultural-fairness. Future steps for psychometric research on the TORR, and substantive research utilizing the TORR, are also presented and discussed.

Essays on Uncertainty, Imperfect Information, and Investment Dynamics

Understanding how imperfect information affects firms' investment decision helps answer important questions in economics, such as how we may better measure economic uncertainty; how firms' forecasts would affect their decision-making when their beliefs are not backed by economic fundamentals; and how important are the business cycle impacts of changes in firms' productivity uncertainty in an environment of incomplete information. This dissertation provides a synthetic answer to all these questions, both empirically and theoretically. The first chapter, provides empirical evidence to demonstrate that survey-based forecast dispersion identifies a distinctive type of second moment shocks different from the canonical volatility shocks to productivity, i.e. uncertainty shocks. Such forecast disagreement disturbances can affect the distribution of firm-level beliefs regardless of whether or not belief changes are backed by changes in economic fundamentals. At the aggregate level, innovations that increase the dispersion of firms' forecasts lead to persistent declines in aggregate investment and output, which are followed by a slow recovery. On the contrary, the larger dispersion of future firm-specific productivity innovations, the standard way to measure economic uncertainty, delivers the ``wait and see" effect, such that aggregate investment experiences a sharp decline, followed by a quick rebound, and then overshoots. At the firm level, data uncovers that more productive firms increase investments given rises in productivity dispersion for the future, whereas investments drop when firms disagree more about the well-being of their future business conditions. These findings challenge the view that the dispersion of the firms' heterogeneous beliefs captures the concept of economic uncertainty, defined by a model of uncertainty shocks. The second chapter presents a general equilibrium model of heterogeneous firms subject to the real productivity uncertainty shocks and informational disagreement shocks. As firms cannot perfectly disentangle aggregate from idiosyncratic productivity because of imperfect information, information quality thus drives the wedge of difference between the unobserved productivity fundamentals, and the firms' beliefs about how productive they are. Distribution of the firms' beliefs is no longer perfectly aligned with the distribution of firm-level productivity across firms. This model not only explains why, at the macro and micro level, disagreement shocks are different from uncertainty shocks, as documented in Chapter 1, but helps reconcile a key challenge faced by the standard framework to study economic uncertainty: a trade-off between sizable business cycle effects due to changes in uncertainty, and the right amount of pro-cyclicality of firm-level investment rate dispersion, as measured by its correlation with the output cycles.