Event Details

External seminar speaker Krisztina Molnar. The event will also occur on Teams.

We exploit a natural experiment of an earthquake to study time preferences and savings behavior. Our ``experiment'' was devastating, but only at the epicenter. Some of those living further from the epicenter felt the shakes of the earthquake, but their house did not collapse. While at a similar distance from the epicenter, others did not even feel the shakes. We rely on seismographic and damage data to identify a plausibly exogenous variation in who felt the shakes. For the shaken but not devastated households, our estimates suggest that the traumatic experience induced a shift towards impatience compared to similar individuals who did not feel the shake. Consistent with this finding, the same households increase consumption and decrease their savings. Temporary misfortune leads to lasting misfortune. People save less from disposable income for several years after the earthquake. The timing and magnitude are important from a life-cycle perspective, and households become more exposed to adverse economic shocks.