Living like there’s no tomorrow: The psychological effects of an earthquake on savings and spending behaviorMateusz Filipski, Ling Jin, Xiaobo Zhang and Kevin Z. Chen European Economic Review, 2019, vol. 116, issue C, 107-128 Abstract: Natural disasters impact economies not only through physical damages, but also by affecting survivors emotionally and psychologically. This can alter their economic behavior, in ways that remain poorly understood. We present a model of post-disaster savings that reveals two opposing tendencies: the need to self-insure through increased savings, and the drive to “enjoy life while it lasts” through increased spending. We use panel datasets from China’s Sichuan province, and isolate psychological impacts by focusing on those who lived in quake areas but did not themselves suffer damages or injuries. Although they did not bear economic losses, they saved less, spent more on alcohol, and played majiang (a Chinese game) more often, suggesting that the “no tomorrow” tendency dominated over the precautionary tendency. The magnitude of the savings rate impact, a drop of 0.17 percentage points for each percent of distance closer to the epicenter, is economically significant, and persists in the medium term. Keywords: Disaster; Carpe diem; Savings; Spending; China (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:116:y:2019:i:c:p:107-128 DOI: 10.1016/j.euroecorev.2019.04.004 Access Statistics for this article European Economic Review is currently edited by T.S. Eicher, A. Imrohoroglu, E. Leeper, J. Oechssler and M. Pesendorfer More articles in European Economic Review from Elsevier |
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