Subjective Survival Beliefs, Cognitive Skills and Investments in Risky Assets

F. Maura with C. Dal Bianco, F. Parodi, and G. Weber

We document that underestimation of subjective survival probabilities negatively affects investments in risky assets in the UK context. We then explore the role of cognitive skills in explaining this negative relationship. More precisely, we disentangle a direct effect of cognitive skills on investments in risky assets through entry costs and an indirect effect through survival probability underestimation. We calibrate a life-cycle model to quantify the importance of survival probability underestimation on suboptimal ownership of risky assets. We use the model to evaluate the potential effects of policy interventions aimed at increasing financial literacy. These policy interventions affect the decision to own risky assets by reducing entry costs, but also by reducing survival risk underestimation.

Gender gaps in the urban wage premium

K. Elass with C. García-Peñalosa and C. Schluter

In France, the gender wage gap for the 20% of the workforce living in the densest locations is 22% lower than that for those living in the bottom 20% of the density distribution, indicating that women benefit more from urban density than men. This paper explores the importance of geographical location for understanding the gender wage gap. Following the recent literature on economic geography that takes into account the endogeneity of location, we estimate the difference in the returns to urban density across genders. We build an exhaustive matched employer-employee panel database based on administrative data that allows us to follow almost all French workers during the period 2005-2019. Our results show that earnings increase with density for both men and women, with a significantly higher urban wage premium for women, which is about 55\% larger than for men. We consider different mechanisms that may explain this pattern, such as the difference in returns to experience, access to childcare facilities and the structure of the local labour market. Our findings suggest that these factors explain all of the gender gap in earnings from living in denser areas.

Learning and Unlearning: Gender Policy Diffusion Dynamics

Natalia Ordaz Reynoso et al.