When It’s Worth the Wait: The Effect of Uncertainty on Investment Decisions

Report of January 23, 2013

Between August and September 2012, the American political magazine, Foreign Policy asked a total of 62 well-known US economists what they saw as the main reason for the slow recovery of the labor market. The most common response was "uncertainty" (31 percent). But what exactly does this term mean? And why might it play such an important role? A recent study conducted by DIW Berlin on the basis of behavioral experiments examines the effect of uncertainty on the investment behavior of individuals. The analysis suggests that the reaction of individuals or households to even slight uncertainty is one of caution.

Paul Viefers in: DIW Wochenbericht 4/2013 (PDF, 242.14 KB)