Aggregate Shocks and the Formation of Preferences and Beliefs

Paola Giuliano and Antonio Spilimbergo

No 19218, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: 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.

Keywords: Aggregate shocks; beliefs (search for similar items in EconPapers)
JEL-codes: E00 P00 Z1 (search for similar items in EconPapers)
Date: 2024-07
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Related works:
Working Paper: Aggregate Shocks and the Formation of Preferences and Beliefs (2024)
Working Paper: Aggregate Shocks and the Formation of Preferences and Beliefs (2024)
Working Paper: Aggregate Shocks and the Formation of Preferences and Beliefs (2024)
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