Growing Up in a Recession: Beliefs and the Macroeconomy

Abstract

Does the historical macroeconomic environment affect preferences for redistribution?We find that individuals who experienced a recession when young believe that success in life depends more on luck than effort, support more government redistribution, and tend to vote for left-wing parties.The effect of recessions on beliefs is long-lasting.We support our findings with evidence from three different datasets.First, we identify the effect of recessions on beliefs exploiting time and regional variation in macroeconomic conditions using data from the 1972-2010 General Social Survey.Our specifications control for nonlinear time-period, life-cycle, and cohort effects, as well as a host of background variables.Second, we rely on data from the National Longitudinal Survey of the High School Class of 1972 to corroborate the age-period-cohort specification and look at heterogeneous effects of experiencing a recession during early adulthood.Third, using data from the World Value Survey, we confirm our findings with a sample of 37 countries whose citizens experienced macroeconomic disasters at different points in history.

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