DP7399 Growing Up in a Recession: Beliefs and the Macroeconomy

Author(s): Paola Giuliano, Antonio Spilimbergo
Publication Date: August 2009
Keyword(s): belief formation, macroeconomic shocks, recession, role of the governement
JEL(s): E60, P16, Z13
Programme Areas: International Macroeconomics, Labour Economics, International Trade and Regional Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=7399

Do generations growing up during recessions have different socio-economic beliefs than generations growing up in good times? We study the relationship between recessions and beliefs by matching macroeconomic shocks during early adulthood with self-reported answers from the General Social Survey. Using time and regional variations in macroeconomic conditions to identify the effect of recessions on beliefs, we show that individuals growing up during recessions tend to believe that success in life depends more on luck than on effort, support more government redistribution, but are less confident in public institutions. Moreover, we find that recessions have a long-lasting effect on individuals’ beliefs.