The long-term effects of experienced macroeconomic shocks on wealth

Viola Angelini and Irene Ferrari

No 2021:23, Working Papers from Department of Economics, University of Venice "Ca' Foscari"

Abstract: This paper examines the long-term effects of macro-economic shocks – defined as multi-year peak-to-trough GDP declines of at least 10 percent – experienced until young adulthood on the wealth distribution and portfolio allocation of older individuals in Europe. We document that experiencing more economic depression years when young has a positive effect on wealth at older ages. By analysing individual portfolio choices, preferences and personality, we find that, while experiencing a depression makes individuals more risk averse, it also increases their financial planning horizon and conscientiousness. These results provide evidence that individuals who experienced economic depressions when young invest less in risky assets but save more, and thus tend to accumulate more wealth in the long run.

Keywords: Wealth distribution; economic depressions; risk aversion; early investments (search for similar items in EconPapers)
JEL-codes: D31 E21 G51 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2021
New Economics Papers: this item is included in nep-cwa, nep-eur, nep-fdg, nep-mac and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:ven:wpaper:2021:23

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