The impact of a nuclear catastrophe on economic and political preferences – The case of Chernobyl

Alexander Danzer°, Natalia Danzer*, & Ernst Fehr^
°Ludwig-Maximilians-University of Munich
*Ifo Center for Labour Market Research and Family Economics, Munich
^University of Zurich

In modern economics, preferences are the unmoved movers of economic and social behavior. They are 
taken as given such that all social phenomena need to be explained by changes in beliefs or constraints. 
The assumption of given preferences constitutes however merely a convenient assumption that is not 
supported by evidence. Here, we examine the impact of radiation fallout after the nuclear catastrophe 
on the preferences and beliefs of the Ukrainian population. As the geographical distribution of radiation 
is essentially randomly determined by local and regional whether conditions, the radiation fallout after 
the catastrophe in Chernobyl constitutes a natural experiment. We find that people who were subjects 
to higher radiation after the catastrophe display stronger risk aversion and a higher discounting of 
future returns. They save less, are less entrepreneurial, are much less inclined to support democratic 
political institutions and market economies, and they engage less in political and civic activities. Because 
we exclude the people in the vicinity of Chernobyl from our sample, the radiation fallout "consumed" by 
our sample population is very low – comparable to the exposure of an average individual during one 
year in a non-contaminated environment. It is therefore highly unlikely that the direct health 
consequences of radiation fall out affect people's economic and political preferences. It rather seems 
that the impact is purely psychologically mediated and due to the pervasive uncertainty or fear 
stemming from the imagined future consequences associated with physically unnoticeable and 
unseizable radiation fall-out.