Emotions, Risk Attitudes, and Patience

SOEPpapers 1041, 80 S.

Armando N. Meier

2019

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Abstract

Previous work has shown that preferences are not always stable across time, but surprisingly little is known about the reasons for this instability. I examine whether variation in people’s emotions over time predicts changes in preferences. Using a large panel data set, I find that within-person changes in happiness, anger, and fear have substantial effects on risk attitudes and patience. Robustness checks indicate a limited role of alternative explanations. I further address potential endogeneity concerns by exploiting information about the death of a parent or child. This identification strategy confirms a large causal impact of emotions on preferences.

Themen: Familie



JEL-Classification: D01;D90;D91
Keywords: Emotions, risk attitudes, patience, risk preferences, time preferences