A growing body of work has shown that aggregate shocks affect the formation of preferences and beliefs. This article reviews evidence from sociology, social psychology, and economics to assess the relevance of aggregate shocks, whether the period in which they are experienced matters, and whether they alter preferences and beliefs permanently. We review the literature on recessions, inflation experiences, trade shocks, and aggregate non-economic shocks including migrations, wars, terrorist attacks, pandemics, and natural disasters. For each aggregate shock, we discuss the main empirical methodologies, their limitations, and their comparability across studies, outlining possible mechanisms whenever available. A few conclusions emerge consistently across the reviewed papers. First, aggregate shocks impact many preferences and beliefs, including political preferences, risk attitudes, and trust in institutions. Second, the effect of shocks experienced during young adulthood is stronger and longer lasting. Third, negative aggregate economic shocks generally move preferences and beliefs to the right of the political spectrum, while the effects of non-economic adverse shocks are more heterogeneous and depend on the context.
Authors
- Acknowledgements and Disclosures
- We thank David Romer and five anonymous referees for comments that greatly improved the paper. We also thank Omer Akbal and Adriano De Ruvo for excellent research assistance. The views expressed herein are those of the authors and should not be attributed to the IMF, its Executive Board, or its management, nor to the National Bureau of Economic Research. Any errors are the responsibility of the authors.
- DOI
- https://doi.org/10.3386/w32669
- Pages
- 72
- Published in
- United States of America
Table of Contents
- NBER WORKING PAPER SERIES 1
- AGGREGATE SHOCKS AND THE FORMATION OF PREFERENCES AND BELIEFS 1
- Paola Giuliano Antonio Spilimbergo 1
- Working Paper 32669 httpwww.nber.orgpapersw32669 1
- NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge MA 02138 July 2024 1
- Aggregate Shocks and the Formation of Preferences and Beliefs Paola Giuliano and Antonio Spilimbergo NBER Working Paper No. 32669 July 2024 JEL No. E0P0Z11 2
- Paola Giuliano Anderson School of Management UCLA 110 Westwood Plaza C517 Entrepreneurs Hall Los Angeles CA 90095-1481 and IZA and also NBER paola.giulianoanderson.ucla.edu 2
- Antonio Spilimbergo International Monetary Fund 700 19th Street N.W. Washington DC 20431 aspilimbergoimf.org 2
- 1. Introduction 3
- 2. Historical experiences and the formation of preferences and beliefs 5
- 2.1. Shocks as belief-twisting events 5
- 2.2. Experience-based learning 5
- 2.3. Formative-age hypothesis 6
- 2.4. Sociological theory of generations 7
- 3. What preferences and beliefs are altered by aggregate economic shocks 8
- 3.1. Recessions 9
- 3.1.1. Political preferences and support for redistribution 9
- 3.1.2. Prosocial preferences 12
- 3.1.3. Generalized trust and trust in institutions 14
- 3.1.4. Risk preferences 16
- 3.2. Inflation experiences 17
- 3.3. Trade shocks 18
- 3.3.1. Political preferences 18
- 3.3.2. Preferences toward democracy and authoritarian preferences 20
- 3.4. Taking stock Aggregate economic shocks lower preferences for redistribution 22
- 4. Non-economic aggregate shocks and the formation of preferences and beliefs 24
- 4.1. Migration shocks 24
- 4.1.1. Preferences for redistribution and political preferences 25
- 4.2. War 28
- 4.2.1. Cooperation 30
- 4.2.2. In-group preferences and political participation 30
- 4.2.3. Generalized trust and political trust 31
- 4.2.4. Long-term effects of war on preferences and beliefs 32
- 4.2.5. Risk preferences 33
- 4.3. Terrorist crises 34
- 4.3.1. Political preferences 34
- 4.3.2. Trust in institutions 38
- 4.4 Pandemics 39
- 4.4.1. Generalized trust trust in institutions and trust in science 39
- 4.4.2. Political preferences and preferences for redistribution 40
- 4.5. Natural disasters 42
- 4.5.1. Trust in institutions and political preferences 42
- 4.5.2. Cooperation and risk attitudes 43
- 5. Conclusions 44
- References 49
- Table 1 Overview of papers on shocks and preferences and beliefs 62
- Authors Shock Preferencesbeliefs Main finding Setting Life period Persistent 62
