A study by RWI and ZEW on personality traits shows that People who experience severe financial losses as a result of the corona pandemic show a significantly lower willingness to take risks. This relationship is particularly pronounced in households with low incomes. On the other hand, other personality traits such as patience and the conviction of control do not change after economic losses. This is confirmed by a current study by RWI and ZEW Mannheim.
“The willingness to take risks has decreased significantly among households that suffered severe economic losses during the crisis,” says ZEW scientist Daniel Osberghaus. The relationship is particularly pronounced in households with low incomes and few sources of income. For example, single-earner households show a stronger response than double-earner households. “We assume that the decreasing willingness to take risks is due to the financial losses in the crisis and the associated uncertainty,” says RWI scientist Manuel Frondel. However, it cannot be ruled out that the willingness to take risks and the economic losses were also influenced by factors that could not be taken into account in the study.
Patience and control remain constant
Around half of all German private households suffered economic losses as a result of the corona pandemic and the lockdown measures. This was the result of an earlier survey by RWI and ZEW Mannheim in early summer 2020. Around eight percent of households even rate their losses as serious. While the experience of loss has a negative effect on the willingness to take risks, other psychological personality traits that the team of RWI and ZEW scientists examined are constant. Accordingly, patience and the conviction that an event is primarily the consequence of one’s own behavior – the so-called control conviction – have not changed due to economic losses in the corona crisis. “There is much to suggest that the parameters for patience and the conviction of control remain constant even when external shocks occur,” explains ZEW scientist Daniel Osberghaus.
In their longitudinal study, the researchers from RWI and ZEW Mannheim used data from the Social-Ecological Panel from 2012, 2014, 2015 and 2020. Around 5,500 people took part in each of the surveys. On the basis of this data, the scientists were able to establish a statistical connection between financial loss and changes in personality traits. This was made possible by the difference-in-differences estimation method used, which compares the time trends of heads of households with economic losses with the time trends of unaffected heads of households.
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