Valuing Peace: The Effects of Financial Market Exposure on Votes and Political Attitudes

Abstract

Can participation in financial markets lead individuals to reevaluate the costs of conflict, change their political attitudes, and even their votes? Prior to the 2015 Israeli elections, we randomly assigned Palestinian and Israeli financial assets to likely voters and incentivized them to actively trade for up to 7 weeks. No political messages or nonfinancial information were included. The treatment systematically shifted vote choices toward parties more supportive of the peace process. This effect is not due to a direct material incentive to vote a particular way. Rather, the treatment reduces opposition to concessions for peace and changes awareness of the broader economic risks of conflict. While participants who were assigned Palestinian assets are more likely to associate their assets' performance with peace, they are less engaged in the experiment. Combined with the superior performance of Israeli stocks during the study period, the ultimate effects of Israeli and Palestinian assets are similar. the right-by about 4-5 percentage points (pp) relative to their vote share of 36% in the control. In particular, it reduces support for the incumbent Likud party, headed by Benjamin Netanyahu, by 4-5pp (relative to 20% in the control). At the same time, it increases the probability of voting for parties that support restarting the peace processthe left-by 4-6pp (relative to 25% in the control). This mainly reflects a 3-5pp increase in the probability of voting for the chief opposition group, The Zionist Union, which includes the Labour party. Consistent with random assignment, these estimates are unaffected by controlling for individuals' vote choices in the recently held 2013 elections as well as education, income levels, region, religiosity, risk and time preferences, initial financial literacy, and other characteristics. In terms of magnitude, the effects are comparable to estimated effects of changes in security risks (e.g., living within the range of rockets from Gaza) on Israeli voters (Getmansky and Zeitzoff (2014)).Section 6 examines the underlying mechanisms. The analysis here is more exploratory in nature, as we move away from a one-treatment-one-outcome framework to multiple (potentially underpowered) subtreatments and multiple outcomes, some of which are self-reported attitudes rather than chosen behavior. Nonetheless, we believe the results 1 The Rand Corporation estimates that a two-state solution, which it regards as the most likely to succeed, will yield Israelis an economic dividend of $123 billion over 10 years and Palestinians $50 billion (Anthony, Egel, Ries et al. (2015)). In contrast, a return to widespread conflict would lower Israeli gross domestic product (GDP) by $250 billion and Palestinian by $46 billion over the same period. See also Eckstein and Tsiddon (2004). 2 Since the entire country is a single constituency, our study had no effect on the election outcomes themselves.

What Money Can Buy: How Market Exchange Promotes Values

“…We show that when consumers prefer to transact with those whose behavior aligns with their values (or avoid those who do not), opportunities for exchange serve as a mechanism to discipline profit-maximizing sellers to act as if they support those values held by their customers. 7 This channel complements empirical work demonstrating that exposure to financial markets influences participants' social values, political preferences and voting outcomes through the incentives created by market positions (Jha and Shayo, 2019;Margalit and Shayo, 2020) and provides support for theoretical arguments that market competition's detrimental effects on moral behavior can be mitigated when consumers can express their moral preferences (Dewatripont and Tirole, 2023). 8 Second, by focusing on the value position adopted by a counterpart, our work extends the literature on social responsibility in market exchange (e.g.…”

“…Our work contributes to three broad strands of research. First, we build on long-standing interest in the impacts of market exchange on moral values (e.g., Bowles 1998;Henrich et al, 2010;Bruni and Sugden, 2013;Bartling, Weber and Yao, 2015;Jha and Shayo, 2019;Margalit and Shayo, 2020;Dufwenberg et al 2022;Enke, 2023). Our results contrast with a prominent argument that market exchange inherently erodes concerns for values (e.g., Dufwenberg et al 2011;Sandel, 2012;Falk and Szech, 2013) by providing evidence for a causal channel through which market exchange can lead to the public promotion and transmission of values.…”

How Big Is the Media Multiplier? Evidence from Dyadic News Data

“…Amodio and Di Maio (2017) show how firms bear the direct and indirect costs of violence and political instability. Jha and Shayo (2019) explore how individuals re-evaluate the costs of conflict upon being exposed to financial assets whose prices may be vulnerable to the economic risks of conflict. Brodeur (2018) shows that successful terror attacks in the US reduce the number of jobs and total earnings in the affected counties.…”

Religion, Division of Labor, and Conflict: Anti-Semitism in Germany over 600 Years

“…3 Although a large recent literature has provided empirical evidence for the cultural 4 and political 5 determinants of anti-Semitism, relatively little has been said within quantitative social sciences about its economic roots. 6 The aim of this article is to assess how economic incentives have contributed to shaping the geography of anti-Semitism.…”

“…A large body of empirical literature has documented how anti-Semitism in European history responded to adverse climatic shocks (Anderson et al 2017 and Grosfeld, Sakalli, and Zhuravskaya forthcoming) and major outbreaks of the Black Death between 1348 and 1350 (Cohn 2007, Breuer 1988, and Finley and Koyama 2018. 6 Kuznets (1960) and Baron and Kahan (1975) provide descriptive evidence on the economic history of Jews and reflect on how discrimination might have affected it, but they provide no econometric evidence. We will discuss the more recent contributions to the literature in more detail later.…”