Aggregate Shocks and the Formation of Preferences and Beliefs

Paola Giuliano and Antonio Spilimbergo

Journal of Economic Literature, 2025, vol. 63, issue 2, 542-97

Abstract: A growing body of work highlights how aggregate shocks shape preferences and beliefs. This review synthesizes findings from sociology, social psychology, and economics to explore the significance of these shocks, how the period in which they are experienced matters, and their lasting effects. It examines economic shocks such as recessions, inflation, and trade shocks, alongside noneconomic shocks like migrations, wars, terrorist attacks, pandemics, and natural disasters. Key conclusions emerge: aggregate shocks influence political preferences, risk attitudes, and institutional trust; experiences during young adulthood have stronger, enduring impacts; and economic shocks generally shift preferences toward the political right, while noneconomic yield more varied outcomes depending on the context. The review also evaluates empirical methodologies, their limitations, and mechanisms underlying these effects. By analyzing how shocks alter societal values and behaviors across generations, this work provides insights into the long-term consequences of major disruptions on individual and collective decision-making.

JEL-codes: D72 D81 D83 D91 E32 H23 Z13 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1257/jel.20241674

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