Life-Cycle, Effort and Academic Inactivity

It has been observed that university professors sometimes become less research active in their later years. This paper models the decision to become inactive as a utility maximising problem under conditions of uncertainty and derives an age-dependent activity condition for the level of research productivity. The model implies that professors who are close to retirement age are more likely to become inactive when faced with setbacks in their research while those who continue research do not lower their activity levels. Using data from the University of Iceland, we find support for the model’s predictions. The model suggests that universities should induce their older faculty to remain research active by striving to make their research more productive and enjoyable, maintaining peer pressure, reducing job security and offering higher performance related pay.

Effects of stress on economic decision-making: Evidence from laboratory experiments

The ways in which preferences respond to the varying stress of economic environments is a key question for behavioral economics and public policy. We conducted a laboratory experiment to investigate the effects of stress on financial decision making among individuals aged 50 and older. Using the cold pressor task as a physiological stressor, and a series of intelligence tests as cognitive stressors, we find that stress increases subjective discounting rates, has no effect on the degree of risk-aversion, and substantially lowers the effort individuals make to learn about financial decisions.

Monetary Policy in Times of Financial Stress.

Some studies argue that the Fed reacts to financial market developments. Using data covering the period 1985:Q1 - 2008:Q4 and employing an augmented Taylor rule specification, we re-examine that conjecture. We find that evidence in favour of such a reaction is largely driven by the Fed’s behaviour during the 2007-2008 financial crisis.