The Wall in the Head: Do Institutions Affect Psychological Dispositions? An Examination of East and West Germany

I examine the relationship between historical institutions and culture in the context of the East-West German divide of the 20th century. East Germany was exposed to collectivist values through communist institutions, which I... [ view full abstract ]

I examine the relationship between historical institutions and culture in the context of the East-West German divide of the 20th century. East Germany was exposed to collectivist values through communist institutions, which I hypothesize affected individuals' psychological dispositions. These psychological dispositions, in turn, could contribute to ongoing economic discrepancies between East and West Germany. I evaluate the effects of communist institutions on individuals' locus of control at the end of the 1900s and risk-taking preferences in the early 2000s, using a spatial regression discontinuity design. The results reveal a difference between East and West in terms of risk-taking preferences, with Easterners having lower risk-taking preferences. I find no differences in terms of locus of control.