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Instability of preferences due to Covid-19 Crisis and emotions: a natural experiment from urban Burkina Faso

Delphine Boutin, Laurène Petifour and Haris Megzari
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Delphine Boutin: BSE - Bordeaux Sciences Economiques - UB - Université de Bordeaux - CNRS - Centre National de la Recherche Scientifique
Haris Megzari: BSE - Bordeaux Sciences Economiques - UB - Université de Bordeaux - CNRS - Centre National de la Recherche Scientifique

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Abstract: The salience of the first Covid-19 crisis over a well-identified period represents an unexpected and abrupt change in the environment. This study uses the onset of the Covid-19 crisis to empirically examine whether risk and time preferences change in response to this exogenous shock. We use an original panel dataset conducted in January 2020 (before any event) and June 2020 (after the removal of strong economic measures) among women working in the informal sector in Ouagadougou, Burkina Faso. We use individual fixed effects on a balanced panel of 853 women to isolate the specific causal effect of the Covid-19 crisis on variation in attitudes toward risk and time over these six months and rule out alternative explanations for differences in preferences. We demonstrate strong preference instability: risk aversion changed over the period in both the gain (13%) and loss (-47%) domains, while impatience increased by 9%. We also show that risk aversion (in both domains) is non-sensitive to actual impacts, but appears to be driven by economic fears and concerns related to the Covid-19 crisis. We also find that greater exposure to the media reinforces preference instability: the more informed the respondent is, the more their risk and time preferences vary. The same phenomenon is observed when their source of information comes from the government or from a social network (Facebook and WhatsApp).

Keywords: Covid-19; Risk attitude; Impatience; Emotions; Media exposure (search for similar items in EconPapers)
Date: 2022-03-29
New Economics Papers: this item is included in nep-cbe
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