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Culture and Institutions: Long-lasting effects of communism on risk and time preferences of individuals in Europe

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  • Schaewitz, Johannes
  • Wang, Mei
  • Rieger, Marc Oliver

Abstract

Even three decades after the end of communism in Eastern Europe, there are still observable differences in financial risk and time preferences compared to Western Europe. Using data from two large-scale surveys – one including European countries (INTRA) and one for West and East Germany (SOEP) – we show that the causes of these differences are not the same: While differences in loss aversion and patience are most likely caused by deeply rooted cultural differences that date back even before communist times, other differences can be explained by experiences during the communist era and the transition processes that followed. These insights may also help to predict what differences are more likely to converge in the near future.

Suggested Citation

  • Schaewitz, Johannes & Wang, Mei & Rieger, Marc Oliver, 2022. "Culture and Institutions: Long-lasting effects of communism on risk and time preferences of individuals in Europe," Journal of Economic Behavior & Organization, Elsevier, vol. 202(C), pages 785-829.
    • Handle: RePEc:eee:jeborg:v:202:y:2022:i:c:p:785-829
    DOI: 10.1016/j.jebo.2022.07.009
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    More about this item

    Keywords

    Prospect theory; Time preferences; Socialist institutions; Transition; Cross-cultural comparison;
    All these keywords.

    JEL classification:

    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • P3 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions

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