Negative shocks predict change in cognitive function and preferences: assessing the negative affect and stress...

Area of Science:

• Behavioral Economics
• Cognitive Psychology
• Sociology

Background:

• Global households face negative shocks, impacting cognitive function and decision-making preferences.
• Previous research indicates that adverse events alter risk, time, and social preferences.

Purpose of the Study:

• To analyze the impact of various negative shocks on cognitive function and preferences.
• To investigate whether stress or negative emotions mediate the effects of shocks on behavior.

Main Methods:

• Longitudinal multi-country survey in Italy, Spain, and the UK (N=4890).
• Assessed cognitive function using the Cognitive Reflection Test.
• Measured risk, time, and social preferences via validated experimental questions.
• Examined four shock types: labor market, health, stressful events, and mental health.

Main Results:

• Individuals experiencing shocks showed lower cognitive functioning.
• Shocks led to increased risk-loving behavior.
• Affected individuals exhibited a higher propensity for negative reciprocity (punishment).
• Stress and negative emotions did not significantly drive these observed behavioral changes.

Conclusions:

• Negative shocks demonstrably impair cognitive function and alter economic preferences.
• The observed behavioral shifts are not solely attributable to heightened stress or negative emotions.
• Findings have implications for understanding societal responses to crises and economic shocks.