Does Testosterone Administration Increase Competitiveness, Confidence and Financial Risk-taking in Men?

The sex steroid hormone testosterone regulates male-typical behaviors such as aggression and displays of dominance in non-human animals. According to the Challenge Hypothesis, these effects arise from context-sensitive testosterone increases that facilitate inter-male competitions over resources, status, and mates. A growing literature documents similar effects of testosterone on economic behaviors related to competition and risk-taking in humans, though findings to date have been mixed. Here, we report two randomized double-blind placebo-controlled testosterone administration experiments, whose combined sample (N = 334) is substantially larger than any previous investigation of the topic (N1 = 91, N2 = 243). The studies were designed independently by research groups in Europe and the US, and both investigated testosterone’s effects on men’s willingness to compete, confidence, and risk-taking—dimensions of economic behavior that are theoretically linked to the Challenge Hypothesis, show robust sex differences, and predict important real-life outcomes such as career choice. We find no evidence for effects of testosterone on any of the behavioral tasks studied across the two experiments, with effect point estimates that are small and inconsistent. The studies had 90% statistical power to detect effects that are larger than d = 0.68 and d = 0.42 respectively, and equivalence tests confidently reject effects that are greater than these magnitudes. Our findings cast doubt on the proposition that testosterone is a meaningful causal driver of the stereotypically “masculine” dimensions of economic behavior studied, and suggest that even if true effects existed, detecting them experimentally would be challenging.

How Stress Affects Performance and Competitiveness Across Gender

Because many key career events, such as examinations and interviews, involve competition and stress, gender differences in response to these factors could help to explain the labor market gender gap. In a laboratory experiment, we manipulate psychosocial stress using the Trier Social Stress Test and confirm that this is effective by measuring salivary cortisol level and heart rate. Subjects perform in a real-effort task under both tournament and piece-rate incentives, and we elicit willingness to compete. We find that women under heightened stress perform worse than women in the control group when compensated with tournament incentives, whereas there is no treatment difference under piece-rate incentives. For men, stress does not affect output under competition or under piece rate. The gender gap in willingness to compete is not affected by stress, but stress decreases competitiveness overall, which is related to performance for women. Our results could explain gender differences in performance under competition, with implications for hiring practices and incentive structures in firms. This paper was accepted by Axel Ockenfels, behavioral economics.

A Tale of Two Nordic Powers

Chapter 8 explores Denmark and Norway’s divergent responses to the revelation of Arctic resources in 2007. This chapter employs a natural experiment that exploits the discovery of North Sea oil in the 1960s. The two Nordic nations are extremely similar, but Norway discovered oil, while Denmark did not. Norway embarked on a resource-driven development path, while Denmark, with no oil reserves to exploit, invested heavily in its citizens’ productivity and human capital. As a result, Norway’s economic structure became land-oriented and Denmark’s production-oriented. This provides an opportunity to observe the effect that variation in each state’s economic structure had on its preference for territory and willingness to compete over its control. The findings reveal that Norway’s economic dependence on income from natural resources drove Oslo to invest much more than Copenhagen in projecting power to secure Arctic claims. This finding strongly confirms Rent-Addiction Theory’s predictions.