Change in time preferences: Evidence from the Great East Japan Earthquake

Abstract

This study examines whether individuals' time preferences are affected by the damage resulting from the tsunami in the Great East Japan Earthquake of 2011, using panel surveys before and after the earthquake. When the change in time preferences is measured using the (β, δ) model, I find that the present bias tendency is increased (shrinking β), although the change in the time discount rate (δ) is not statistically significant for those affected by the tsunami. This study also investigates changes in time preferences using other behavioral indicators. The results show that those affected by the tsunami are more prone to impulse shopping, procrastination, unplanned overconsumption, and increased body mass indices (BMI). Moreover, I find gender heterogeneous changes in time preferences. Changes in time preferences appeared in males immediately after the earthquake in 2012 and 2013, and have been subsiding thereafter. On the other hand, these changes appeared in females in 2016 and 2017, i.e., after a lag since the earthquake.

Do Risk Preferences Change? Evidence from the Great East Japan Earthquake

“…As discussed in Subsection IVA, our results are robust to the choice of two risk-aversion measures. 15 Our measure of risk preference has several advantages. First, one cannot easily isolate the change in risk preference from the change in risk perception because risk perception is likely to change when risk preference changes.…”

“…However, this may be of little concern because only a small fraction of respondents chooses JPY 50,000 (1.4 percent in 2011, 1.3 percent in 2012, and 1.6 percent in 2016). 15 Because both risk-aversion measures are bounded above and below, we alternatively use the logit transformation of each risk preference measure as outcomes. This method is conventionally used for regression analysis when a dependent variable is a fractional variable bounded between zero and one, such as fractions (McDowell and Cox 2015).…”

Does Affective Forecasting Error Induce Changes in Preferences? Lessons from Danish Soldiers Anticipating Combat in Afghanistan

“…suggest that the experience of such violent events could explain psychological changes. These studies cover large economic shocks (Arrondel and Masson 2014;Brunnermeier and Nagel 2008;Krupka and Stephens 2013;Malmendier and Nagel 2011), and also include natural disasters (Akesaka 2019;Bernile, Bhagwat, and Rau 2017;Callen 2015;Cameron and Shah 2015;Cassar, Healy, and Von Kessler 2017;de Blasio et al 2021;Eckel, El-Gamal, and Wilson 2009;Hanaoka, Shigeoka, and Watanabe 2018;Van den Berg, Fort, and Burger 2009;Willinger, Bchir, and Heitz 2013) and violence (Brown et al 2019;Callen et al 2014;Jakiela and Ozier 2019;Kim and Lee 2014;Moya 2018;Voors et al 2012). Moreover, Hanaoka, Shigeoka and Watanabe (2018) and Akesaka (2019) find that changes in preferences persist even five years after an earthquake, and Bernile, Bhagwat and Rau (2017) obtain similar results for chief executive officers who experienced extreme fatal disasters in early life.…”

Untitled

“…All Option B amounts were as follows: THB 330, THB 306, THB 594, THB 303, THB 312. We followed the methods for finding discount rates used in Ikeda et al (2010) and Akesaka (2018), where the discount rate is the interest rate at which participants switch from choosing Option A to Option B [42,43]. For example, a participant who selected Option A for THB 303, THB 306, THB 312, and THB 330 (interest rate of 521%) but selected Option B for THB 594 (interest rate of 5110%) was assigned a discount rate of 521%.…”

“…The 5 prices of lottery tickets are as follows: THB 1, THB 120, THB 450, THB 1050, THB 1500. To measure risk tolerance, we recorded the price point where participants switched from choosing option A to option B, in alignment with the methods of Miura (2017), Ikeda et al (2010), and Akesaka (2018) for finding time discounting rates [42][43][44]. For instance, a participant who chose option A for THB 1, and THB 125 but selected option B for THB 450 onward were assigned a value of 125.…”