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The long-lasting effects of experiencing communism on attitudes towards financial markets

Author

Listed:
  • Laudenbach, Christine
  • Malmendier, Ulrike
  • Niessen-Ruenzi, Alexandra

Abstract

We show that exposure to anti-capitalist ideology can exert a lasting influence on attitudes towards capital markets and stock-market participation. Utilizing novel survey, bank, and broker data, we document that, decades after Germany's reunification, East Germans invest significantly less in stocks and hold more negative views on capital markets. Effects vary by personal experience under communism. Results are strongest for individuals remembering life in the German Democratic Republic positively, e. g., because of local Olympic champions or living in a "showcase city". Results reverse for those with negative experiences like religious oppression, environmental pollution, or lack of Western TV entertainment.

Suggested Citation

  • Laudenbach, Christine & Malmendier, Ulrike & Niessen-Ruenzi, Alexandra, 2024. "The long-lasting effects of experiencing communism on attitudes towards financial markets," SAFE Working Paper Series 429, Leibniz Institute for Financial Research SAFE.
    • Handle: RePEc:zbw:safewp:303039
    DOI: 10.2139/ssrn.3526926
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    More about this item

    Keywords

    Capital markets; Anti-capitalist Ideology; Life-time Experiences; Stockmarket Participation;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • P10 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - General
    • P26 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Property Rights
    • P34 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Finance
    • P36 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Consumer Economics; Health; Education and Training; Welfare, Income, Wealth, and Poverty

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