Stability of economic preferences in times of crisis

Economic preferences such as risk, time, and social preferences play an important role for a wide range of individual behavior and outcomes as well as aggregated economic variables (e.g. GDP growth, volume of trade between countries). While neoclassical economics assumes perfect stability of economic preferences at the individual level over time, this assumption is ultimately an empirical question. However, previous empirical studies analyzing the general temporal stability of economic preferences as well as their changes after exogenous shocks (e.g. economic crises, natural catastrophes, violent conflicts) or due to temporary variations in self-control, emotions, or stress provide ambiguous evidence and mainly focus on risk preferences. Against this background, this project examines the stability of economic preferences in the Covid-19 crisis, which is certainly the biggest societal, health, and economic global crisis since World War II. Based on data from two representative large-scale web surveys among German citizens, the project empirically compares time preferences, altruism, risk preferences, trust, positive reciprocity, and negative reciprocity before and during the crisis. In addition to the consideration of intertemporal correlations for each economic preference, we also analyze the stability of the correlations between all six economic preferences over time. Furthermore, a sub-sample of respondents is surveyed in both time periods, which enables us to apply panel econometric approaches. The corresponding fixed effects estimations that also include individual crisis concerns as well as measures for individual emotions such as fear allow us to shed more light on the causal effects of the Covid-19 crisis on economic preferences. Finally, we examine whether temporal (in)stabilities of economic preferences are different among population groups, for example, with respect to age, gender, or income. Based on the results of the empirical analysis, we will derive implications for economic theory, future econometric analyses, and policy measures.