EconPapers    
Economics at your fingertips  
 

The Long-lasting Effects of Living under Communism on Attitudes towards Financial Markets

Christine Laudenbach, Ulrike Malmendier () and Alexandra Niessen-Ruenzi

No 26818, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We analyze the long-term effects of living under communism and its anticapitalist doctrine on households’ financial investment decisions and attitudes towards financial markets. Utilizing comprehensive German brokerage data and bank data, we show that, decades after Reunification, East Germans still invest significantly less in the stock market than West Germans. Consistent with communist friends-and-foes propaganda, East Germans are more likely to hold stocks of companies from communist countries (China, Russia, Vietnam) and of state-owned companies, and are unlikely to invest in American companies and the financial industry. Effects are stronger for individuals exposed to positive “emotional tagging,” e.g., those living in celebrated showcase cities. Effects reverse for individuals with negative experiences, e.g., environmental pollution, religious oppression, or lack of (Western) TV entertainment. Election years trigger further divergence of East and West Germans. We provide evidence of negative welfare consequences due to less diversified portfolios, higher-fee products, and lower risk-adjusted returns.

JEL-codes: D03 D14 D83 D84 E21 G11 (search for similar items in EconPapers)
Date: 2020-03
New Economics Papers: this item is included in nep-cis, nep-mac, nep-sea and nep-tra
Note: AG CF POL
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.nber.org/papers/w26818.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html. Free access is also available to older working papers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:26818

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w26818
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2020-11-24
Handle: RePEc:nbr:nberwo:26818