Trabajo de grado - Maestría
The cognitve cost of violence on growth
Fecha
2022-06-02Registro en:
instname:Universidad de los Andes
reponame:Repositorio Institucional Séneca
Autor
González Pedraza, Sergio
Institución
Resumen
The relationship between violence and growth has been typically associated with capi-
tal destruction and institutional change. This paper proposes a new channel through which
violence impacts growth: cognitive changes that increase risk aversion and reduce patience.
I develop an overlapping generations model with inheritances where violence exposure af-
fects risk aversion and a hyperbolic discount rate. I find that agents exposed to violence
increase their present consumption and reduce their savings which decreases future con-
sumption and the inheritances left for the next generation, and the capital available for the
next period. So next generations experience a fall in their income. The reduction of welfare
and product can last up to 10 generations, according to simulation. In conclusion, the cog-
nitive effects of violence on preferences can reduce growth and welfare for centuries even
if a single generation is exposed.