How Optimistic and Pessimistic Narratives About COVID-19 Impact Economic Behavior

ECONtribute Discussion Paper No. 91 (2021)

67 Pages Posted: 19 May 2021

See all articles by Sören Harrs

Sören Harrs

University of Cologne - Department of Economics

Lara Marie Müller

University of Cologne - Department of Economics

Bettina Rockenbach

University of Cologne

Date Written: May 18, 2021

Abstract

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

Harrs, Sören and Müller, Lara Marie and Rockenbach, Bettina, How Optimistic and Pessimistic Narratives About COVID-19 Impact Economic Behavior (May 18, 2021). ECONtribute Discussion Paper No. 91 (2021), Available at SSRN: https://ssrn.com/abstract=3849035 or http://dx.doi.org/10.2139/ssrn.3849035

Sören Harrs (Contact Author)

University of Cologne - Department of Economics ( email )

Cologne, 50923
Germany

Lara Marie Müller

University of Cologne - Department of Economics ( email )

Cologne, 50923
Germany

Bettina Rockenbach

University of Cologne ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany
++49 470 8664 (Phone)
++49 470 8668 (Fax)

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