Purse Strings Versus Heart Strings: Do Emotions Affect Economic Behaviour?

Viet Hoang Nguyen () and Edda Claus
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Viet Hoang Nguyen: Melbourne Institute: Applied Economic & Social Research, University of Melbourne, https://findanexpert.unimelb.edu.au/profile/361260-viet-nguyen
Edda Claus: Wilfrid Laurier University and CAMA

Melbourne Institute Working Paper Series from Melbourne Institute of Applied Economic and Social Research, The University of Melbourne

Abstract: Do emotions affect economic behavior? We identify two transmission channels of negative emotions to consumption, one predicted by economists and one predicted by psychologists. We use self-reported financial stress and mental distress to identify negative emotions and use current and expected spending to capture consumption behavior. We find that the psychology transmission channel dominates when budget constraints are not binding. As a coping mechanism, consumers increase consumption to regulate the negative emotions caused by stress. Our results are in line with appraisal models of emotions where the perceived cause of the emotion rather than its pleasantness drives behavior.

Keywords: emotions; financial stress; mental distress; spending; appraisal models (search for similar items in EconPapers)
JEL-codes: D12 D84 D91 E21 (search for similar items in EconPapers)
Pages: 72pp
Date: 2024-07
New Economics Papers: this item is included in nep-cbe
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