The Long-lasting Effects of Experiencing Communism on Attitudes towards Financial Markets

Ulrike M. Malmendier, Christine Laudenbach and Alexandra Niessen-Ruenzi

No 14939, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Attitudes towards capital markets and stock-market investment still differ widely between Western and formerly communist countries, but there is also significant heterogeneity within the East. We argue that the speed of convergence is predicted by the quality of life-time experiences under communism. Utilizing novel German brokerage and bank data we document that, decades after Reunification, East Germans invest significantly less in stocks and hold more negative views on capital markets if they had unrelated positive experiences, e.g., from Olympic games or living in celebrated showcase cities. Results reverse for East Germans with negative experiences, like environmental pollution and religious oppression.

Keywords: Capital markets; Communism; Life-time experiences; Positive versus negative emotional tagging; Stock-market participation (search for similar items in EconPapers)
JEL-codes: D03 D14 D83 D84 E21 G11 (search for similar items in EconPapers)
Date: 2020-06
New Economics Papers: this item is included in nep-mac and nep-ore
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Citations: View citations in EconPapers (6)

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