A Study of How Economic Attitudes Are Shaped by Environmental Shocks and Life Experiences

Social attitudes, attitudes toward financial risk and attitudes toward deferred gratification are thought to influence many important economic decisions over the life-course. In economic theory, these attitudes are key components in diverse models of behavior, including collective action, saving and investment decisions and occupational choice. The relevance of these attitudes have been confirmed empirically. Yet, the factors that influence them are not well understood. This research evaluates how these attitudes are affected by large disruptive events, namely, a natural disaster and a civil conflict, and also by an individual-specific life event, namely, having children.

By implementing rigorous empirical strategies drawing on rich longitudinal datasets, this research project advances our understanding of how life experiences shape these attitudes. Moreover, compelling evidence is provided that the observed changes in attitudes are likely to reflect changes in preferences given that they are not driven just by changes in financial circumstances. Therefore the findings of this research project also contribute to the discussion of whether preferences are really fixed, a usual assumption in economics.

In the first chapter, I study how altruistic and trusting attitudes are affected by exposure to the 2004 Indian Ocean tsunami as long as ten years after the disaster occurred. Establishing a causal relationship between natural disasters and attitudes presents several challenges as endogenous exposure and sample selection can confound the analysis. I take on these challenges by exploiting plausibly exogenous variation in exposure to the tsunami and by relying on a longitudinal dataset representative of the pre-tsunami population in two districts of Aceh, Indonesia. The sample is drawn from the Study of the Tsunami Aftermath and Recovery (STAR), a survey with data collected both before and after the disaster and especially designed to identify the impact of the tsunami. The altruistic and trusting attitudes of the respondents are measured by their behavior in the dictator and trust games. I find that witnessing closely the damage caused by the tsunami but without suffering severe economic damage oneself increases altruistic and trusting behavior, particularly towards individuals from tsunami affected communities. Having suffered severe economic damage has no impact on altruistic behavior but may have increased trusting behavior. These effects do not seem to be caused by the consequences of the tsunami on people’s financial situation. Instead they are consistent with how experiences of loss and solidarity may have shaped social attitudes by affecting empathy and perceptions of who is deserving of aid and trust.

In the second chapter, co-authored with Ryan Brown, Duncan Thomas and Andrea Velasquez, we investigate how attitudes toward financial risk are affected by elevated levels of insecurity and uncertainty brought on by the Mexican Drug War. To conduct our analysis, we pair the Mexican Family Life Survey (MxFLS), a rich longitudinal dataset ideally suited for our purposes, with a dataset on homicide rates at the month and municipality-level. The homicide rates capture well the overall crime environment created by the drug war. The MxFLS elicits risk attitudes by asking respondents to choose between hypothetical gambles with different payoffs. Our strategy to identify a causal effect has two key components. First, we implement an individual fixed effects strategy which allows us to control for all time-invariant heterogeneity. The remaining time variant heterogeneity is unlikely to be correlated with changes in the local crime environment given the well-documented political origins of the Mexican Drug War. We also show supporting evidence in this regard. The second component of our identification strategy is to use an intent-to-treat approach to shield our estimates from endogenous migration. Our findings indicate that exposure to greater local-area violent crime results in increased risk aversion. This effect is not driven by changes in financial circumstances, but may be explained instead by heightened fear of victimization. Nonetheless, we find that having greater economic resources mitigate the impact. This may be due to individuals with greater economic resources being able to avoid crime by affording better transportation or security at work.

The third chapter, co-authored with Duncan Thomas, evaluates whether attitudes toward deferred gratification change after having children. For this study we also exploit the MxFLS, which elicits attitudes toward deferred gratification (commonly known as time discounting) by asking individuals to choose between hypothetical payments at different points in time. We implement a difference-in-difference estimator to control for all time-invariant heterogeneity and show that our results are robust to the inclusion of time varying characteristics likely correlated with child birth. We find that becoming a mother increases time discounting especially in the first two years after childbirth and in particular for those women without a spouse at home. Having additional children does not have an effect and the effect for men seems to go in the opposite direction. These heterogeneous effects suggest that child rearing may affect time discounting due to generated stress or not fully anticipated spending needs.

Parental Bereavement: Looking Beyond Grief - Challenges and Health

For most parents there is no imaginable event more devastating than the death of their child. Nevertheless, while bereaved parents grieve they are also expected to carry on with their life. The day-to-day activities that were once routine for these parents may now be challenging due to the emotional turmoil they are experiencing. To date parental bereavement has been described as complex, intense, individualized, and life-long and their grief responses are interwoven with their daily activities, but the nature of their daily life challenges are not known.

This dissertation highlights the significance of how parents respond to their bereavement challenges because bereaved parents have higher morbidity and mortality rates than non-bereaved parents or adults who have lost their spouse or parents. Many bereaved parents in their daily routines include activities that allow them to maintain a relationship with their deceased child. These behaviors have been described as “continuing bonds”, but with this dissertation the continuing bonds concept is analyzed to provide a clear conceptual definition, which can be used for future research.

Using the Adaptive Leadership Framework as the theoretical lens and a mixed method, multiple case study design, the primary study in this dissertation aims to provides knowledge about the challenges parents face in the first six months following the death of their child, the work they use to meet these challenges, and the co-occurrence of the challenges, and work with their health status. Bereaved parents challenges are unique to their individual circumstances, complex, interrelated and adaptive, as they have no easy fix. Their challenges were pertaining to their everyday life without their child and classified as challenges related to: a) grief, b) continuing bonds, c) life demands, d) health concerns, f) interactions, and g) gaps in the health care system. Parents intuitively responded to the challenges and attempted to care for themselves. However, the role of the healthcare system to assist bereaved parents during this stressful time so that their health is not negatively impacted was also recognized. This study provides a foundation about parental bereavement challenges and related work that can lead to the development and testing of interventions that are tailored to address the challenges with a goal of improving bereaved parents health outcomes.