How Optimistic and Pessimistic Narratives About COVID-19 Impact Economic Behavior
ECONtribute Discussion Paper No. 91 (2021)
67 Pages Posted: 19 May 2021
Date Written: May 18, 2021
Politicians, scientists and journalists have aired vastly different assessments of the COVID-19 pandemic, ranging from rather optimistic to very pessimistic ones. In this paper we investigate how narratives conveying different assessments of the pandemic impact economic behavior. In a controlled experiment with incentivized economic games we find that subjects behave more risk averse and less patient when confronted with a pessimistic compared to an optimistic or balanced narrative. Further we find that narratives change subjects' expectations about the pandemic and the stock market. Hence our experiment provides causal evidence for an impact of narratives on fundamental determinants of household behavior.
Keywords: Narrative Economics, Risk Aversion, Patience, Expectations
JEL Classification: D80, D91, E71, G41
Suggested Citation: Suggested Citation