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One-minute earthquake, years of patience: Evidence from Mexico on the effect of earthquake exposure on time preference

Author

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  • Pierre-Guillaume Méon
  • Robin Rampaer
  • David Raymaekers

Abstract

Using a survey of nearly 20,000 Mexican residents matched with data on 50 earthquakes, we observe evidence that people affected by an earthquake report a lower discount rate, implying greater patience. The effect is stronger for more intense earthquakes and is robust to controlling for a series of socioeconomic variables, locality, and event fixed effects. It is not driven by changes in risk aversion, expected future income streams, or life expectancy, nor is it impacted by people moving in or out of affected localities. People react in the same way regardless of their age at the time of the earthquake, in line with the life-long openness hypothesis. Estimates suggest that the effect of more intense earthquakes diminishes slowly, persisting over decades. This effect is independent of gender but varies with education and wealth. Finally, respondents who have experienced an earthquake adjust their savings and health-related behaviors in ways consistent with a decrease in their discount rate.

Suggested Citation

  • Pierre-Guillaume Méon & Robin Rampaer & David Raymaekers, 2021. "One-minute earthquake, years of patience: Evidence from Mexico on the effect of earthquake exposure on time preference," Working Papers CEB 21-015, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:sol:wpaper:2013/330528
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    More about this item

    Keywords

    Natural disasters; Time preference;

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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