Becoming sensitive: Males’ risk and time preferences after the 2008 financial crisis

This paper presents evidence suggesting men’s (but not women’s) risk and time preferences have systematically become sensitive to local economic conditions since the global financial crisis (GFC) of 2008. Studying longitudinal, nationally representative data for 22,579 Australian-based respondents in up to 11 survey waves from 2002 to 2015, men respond with increased risk aversion and impatience to a rise in their region’s unemployment rate – but only since 2008. We find no such relationship for women or before the crisis. This conclusion persists when accounting for (i) fixed effects on the individual, regional, and time level, (ii) demographics, (iii) national economic conditions, as well as (iv) the respondent’s employment situation, income, and wealth. Results prevail when employing an instrumental variable approach based on initial industry shares in the respondent’s region. Exploring one potential mechanism, higher regional unemployment rates are also linked to men (but not women) being more unhappy since 2008. This ‘happiness channel’, however, can only partially explain the link between the local unemployment rate and risk preferences.