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Does a financial crisis make consumers increasingly prudent?

Liesbeth Noordegraaf-Eelens and Philip Hans Franses

No EI2014-16, Econometric Institute Research Papers from Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute

Abstract: __Abstract__ Given the enormous impact of the 2007-2010 worldwide financial crisis on societies, one may wonder what the impact was on individual consumer behavior concerning financial products and services. A natural expectation would be that the crisis made people aware of the risks and consequently that they should become increasingly prudent when their own finances are at stake. Prudency can appear in gathering more information, more frequently asking for advice and higher reluctance to buy higher risk and unknown products. In this paper we hold statements of recent buyers of financial products and services against those of a representative group of already long term owners of financial decision makers. Interestingly, based upon detailed data covering the period 2007-2013 we find only small differences between recent closers and the representative group. In fact, in most cases these differences point towards less prudent behavior. Moreover, we find that these differences cannot be explained by GDP growth. We also find that higher educated consumers show more prudence. In sum, we document that consumer behavior is relatively indifferent to changes at a macroeconomic level.

Keywords: attitude; crisis; experience; education; prudence; financial decision making (search for similar items in EconPapers)
JEL-codes: D1 D14 G00 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mkt
Date: 2014-08-18
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