Economic Policy Uncertainty and Self-Control: Evidence from Unhealthy Choices

52 Pages Posted: 1 Jan 2020

See all articles by Ivalina Kalcheva

Ivalina Kalcheva

University of Texas at San Antonio - Department of Finance

Ping McLemore

Federal Reserve Banks - Federal Reserve Bank of Richmond

Richard W. Sias

University of Arizona - Department of Finance

Date Written: December 4, 2019

Abstract

We hypothesize that greater economic policy uncertainty (EPU) leads to increases in unhealthy behaviors by lowering individuals’ impulse control. Based on 6.1 million interviews over 22 years, our analysis reveals a positive relation between EPU and the propensity to make poor lifestyle choices including higher rates of alcohol consumption, a larger number of drinks consumed, and greater binge drinking. EPU has long-lasting effects on drinking behavior, consistent with habit formation. Moreover the relation is stronger for younger individuals whose habits are more malleable. We find similar results when using smoking rates to measure unhealthy choices.

Keywords: economic policy uncertainty, unhealthy choices, impulse control, temporal discounting

JEL Classification: G40, G41

Suggested Citation

Kalcheva, Ivalina and McLemore, Ping and Sias, Richard W., Economic Policy Uncertainty and Self-Control: Evidence from Unhealthy Choices (December 4, 2019). Available at SSRN: https://ssrn.com/abstract=3502542 or http://dx.doi.org/10.2139/ssrn.3502542

Ivalina Kalcheva

University of Texas at San Antonio - Department of Finance

San Antonio, TX 78249
United States

Ping McLemore

Federal Reserve Banks - Federal Reserve Bank of Richmond ( email )

P.O. Box 27622
Richmond, VA 23261
United States

Richard W. Sias (Contact Author)

University of Arizona - Department of Finance ( email )

McClelland Hall
P.O. Box 210108
Tucson, AZ 85721-0108
United States

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