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Everybody Hurts: Banking Crises and Individual Wellbeing

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  • Alberto Montagnoli

    (Department of Economics, University of Sheffield, UK)

  • Mirko Moro

    (Division of Economics, Stirling Management School, University of Stirling, UK)

Abstract

We investigate whether banking crises affect individuals' subjective wellbeing (SWB) in eighteen European countries between 1980-2011. We address the potential endogeneity between banking crises and SWB by exploiting spatial and temporal differences in banking crises episodes. We find negative, robust, pronounced and highly persistent effects for events prior to 2007. The 2007-2008 crash lowered SWB in countries that had previously experienced a credit boom. Individuals living in regions hosting financial centres suffer bigger losses. Yet, the impact is similar across socio-demographic groups. These effects extend beyond changes in macroeconomic factors, wealth and fiscal policies: they are hidden psychological costs.

Suggested Citation

  • Alberto Montagnoli & Mirko Moro, 2014. "Everybody Hurts: Banking Crises and Individual Wellbeing," Working Papers 2014010, The University of Sheffield, Department of Economics.
    • Handle: RePEc:shf:wpaper:2014010
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    Cited by:

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    2. Jan-Emmanuel De Neve & George Ward & Femke De Keulenaer & Bert Van Landeghem & Georgios Kavetsos & Michael I. Norton, 2018. "The Asymmetric Experience of Positive and Negative Economic Growth: Global Evidence Using Subjective Well-Being Data," The Review of Economics and Statistics, MIT Press, vol. 100(2), pages 362-375, May.
    3. Adrian Chadi & Matthias Krapf, 2017. "The Protestant Fiscal Ethic: Religious Confession And Euro Skepticism In Germany," Economic Inquiry, Western Economic Association International, vol. 55(4), pages 1813-1832, October.
    4. Tonzer, Lena, 2017. "Uncertainty, financial crises, and subjective well-being," IWH Discussion Papers 2/2017, Halle Institute for Economic Research (IWH).
    5. Jacob Gerner Hariri & Christian Bjørnskov & Mogens K. Justesen, 2016. "Economic Shocks and Subjective Well-Being: Evidence from a Quasi-Experiment," The World Bank Economic Review, World Bank, vol. 30(1), pages 55-77.
    6. Chadi, Adrian, 2015. "Concerns about the Euro and happiness in Germany during times of crisis," European Journal of Political Economy, Elsevier, vol. 40(PA), pages 126-146.
    7. Jacek Rothert & Douglas VanDerwerken & Ethan White, 2020. "Socioeconomic factors and happiness: evidence from self-reported mental health data," Empirical Economics, Springer, vol. 58(6), pages 3101-3123, June.
    8. Iulia Cristina Iuga & Larisa-Loredana Dragolea, 2021. "Well-Being Impact on Banking Systems," JRFM, MDPI, vol. 14(3), pages 1-22, March.

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    More about this item

    Keywords

    well-being; happiness; financial crises; banking crises; difference-in-differences; uncertainty;
    All these keywords.

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • H0 - Public Economics - - General

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