The Long-Lasting Effects of Living under Communism on Attitudes towards Financial Markets

85 Pages Posted: 25 Feb 2020 Last revised: 17 Sep 2023

See all articles by Christine Laudenbach

Christine Laudenbach

SAFE and Goethe University

Ulrike Malmendier

University of California, Berkeley - Department of Economics; University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA); European Corporate Governance Institute (ECGI)

Alexandra Niessen-Ruenzi

European Corporate Governance Institute (ECGI); University of Mannheim - Finance Area

Multiple version iconThere are 2 versions of this paper

Date Written: January 7, 2020

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.

Keywords: Capital markets, Communism, Memory, Emotional tagging, Stock-market participation

JEL Classification: D03, D14, D83, D84, E21, G11

Suggested Citation

Laudenbach, Christine and Malmendier, Ulrike and Niessen-Ruenzi, Alexandra, The Long-Lasting Effects of Living under Communism on Attitudes towards Financial Markets (January 7, 2020). SAFE Working Paper No. 429, Available at SSRN: https://ssrn.com/abstract=3526926 or http://dx.doi.org/10.2139/ssrn.3526926

Christine Laudenbach (Contact Author)

SAFE and Goethe University ( email )

Theodor-W.-Adorno-Platz 3
Frankfurt, 60323
Germany

Ulrike Malmendier

University of California, Berkeley - Department of Economics ( email )

549 Evans Hall #3880
Berkeley, CA 94720-3880
United States
(510) 642-8724 (Phone)
(510) 642-6615 (Fax)

HOME PAGE: http://www.econ.berkeley.edu/~ulrike/

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

HOME PAGE: http://www.iza.org/en/webcontent/personnel/photos/index_html?key=918

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Alexandra Niessen-Ruenzi

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

University of Mannheim - Finance Area ( email )

Mannheim, 68131
Germany

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