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The Role of Preferences and Institutions in Economic Transitions

GoTriple's project summary

Periods of economic transitions are often unsettling due to the breathtaking speed of changes in economic conditions. Then again, transitions also bear major chances to establish new orders. This project analyzes how dramatic changes in institutions during transition periods shape not only the economic behavior, but also the preferences of people. It focuses on two specific transition episodes, namely the transition from state-centered and autocratic to market-based and democratic systems in East Germany, as well as in many countries of Sub-Saharan Africa. Methodologically, this project exploits two distinct reasons why economic transitions offer unique research opportunities. First, economic transitions deal with large shifts, and the size of these changes in itself makes it easier to detect behavioral adjustments in noisy micro data sets. Second, initial conditions coming from institutional features or decisions taken before the start of the transition can often be taken as exogenous, enabling the researcher to establish causality and to rule out reverse causality. The project consists of two subprojects. The first subproject investigates whether there is a causal effect of public child care supply on fertility and female labor market participation. The second subproject is dedicated to the question whether there exists a positive feedback process from the economic and political system on individual preferences.

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