Working Paper: NBER ID: w15321
Authors: Paola Giuliano; Antonio Spilimbergo
Abstract: Does the historical macroeconomic environment affect preferences for redistribution? We find that individuals who experienced a recession when young believe that success in life depends more on luck than effort, support more government redistribution, and tend to vote for left-wing parties. The effect of recessions on beliefs is long-lasting. We support our findings with evidence from three different datasets. First, we identify the effect of recessions on beliefs exploiting time and regional variation in macroeconomic conditions using data from the 1972–2010 General Social Survey. Our specifications control for nonlinear time-period, life-cycle, and cohort effects, as well as a host of background variables. Second, we rely on data from the National Longitudinal Survey of the High School Class of 1972 to corroborate the age-period-cohort specification and look at heterogeneous effects of experiencing a recession during early adulthood. Third, using data from the World Value Survey, we confirm our findings with a sample of 37 countries whose citizens experienced macroeconomic disasters at different points in history.
Keywords: redistribution; macroeconomic shocks; political beliefs; preferences
JEL Codes: E60; P16; Z13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Economic shocks (F69) | Omitted variable bias (C20) |
| Experiencing a recession during youth (E24) | Increase in preference for government redistribution (H19) |
| Experiencing a recession during youth (E24) | Belief that success is more dependent on luck than effort (D80) |
| Belief that success is more dependent on luck than effort (D80) | Increased support for left-wing parties and government intervention (P35) |
| Experiencing a recession during youth (E24) | Changes in preferences for redistribution (H23) |