July 23, 2012
Is the crisis ‘decoupling’ the Greeks from Greece? Using EU survey data, this column shows that before the global crisis, Greeks’s assements of their own economic stance was in line with that of their country as a whole. But during the recent crisis years most Greeks thought they were doing better than average. This column explains this puzzle using insights from psychology.
The current crisis may be thought of as a sort of natural experiment to understand how common people are living dramatic years. For example, how do the Greeks perceive their own personal financial situation with respect to that of their country? Economically speaking, the representative citizen cannot systematically drift apart from that of the country where she lives. GDP is, after all, the sum of the individual incomes in the country. Yet, the 'psychological' stance of individuals may diverge in the course of very deep and prolonged economic crises.
A unique dataset from the European Commission helps us dig into individuals’ perceptions of their economic situations. The dataset is based monthly surveys from the Joint Harmonised EU Programme of Business and Consumer Surveys (European Commission 1997, 2007). Respondents face, among others, the following questions:
- How has the financial situation of your household changed over the last 12 months?
- How do you expect the financial position of your household to change over the next 12 months?
- How do you think the general economic situation in the country has changed over the past 12 months?
- How do you expect the general economic situation in the country to develop over the next 12 months?