MARKETING AND MANAGEMENT COMMUNICATION


Te effect of job loss on risky


financial decision-making Proceedings of the National Academy of Sciences, 122, 1, January 2025 LINK TO PAPER


SAMUEL HIRSHMAN ASSISTANT PROFESSOR


Samuel Curtis Johnson Graduate School of Management


Cornell SC Johnson College of Business Cornell University


Summary Job loss is a common and disruptive life event, known to have numerous


long-term negative effects on financial, health, and social outcomes. While the negative effects of becoming unemployed are well understood, the influence of job loss on financial decisions has received little attention. Te authors focus on job loss and risk-taking behavior, using a multimethods approach presenting correlational evidence from survey data, and causal evidence from administrative data on gambling spending from a large bank and an online lab experiment. Tey find that job loss tends to shift decision making toward more risky financial decisions, and this can accentuate the negative outcomes.


Basic economic models of risk-taking suggest that people should be more hes- itant to lose money when they are facing worsened financial circumstances, and several papers examining the relationship between financial well-being and risk-taking tend to find that risk-taking increases with more income and wealth. On the other hand, income is consistently negatively associated with lottery ticket purchases. People may take on more risk as a way to achieve much-needed liquidity. While a variety of factors could lead to increases in fi- nancial risk-taking, like buying lottery tickets, these patterns could partially re- flect a relationship between peoples’ economic distress and their willingness to take financial risks. Studies also find that internal and external benchmarks alike can drive the newly-unemployed to make financially risky decisions.


Co-authors • Samuel D. Hirshman


Assistant professor, Samuel Curtis Johnson Graduate


School of Management, Cornell SC Johnson College of Business, Cornell University • Piyush Anand, Jones Graduate School of Business, Rice University, Texas


CONTENTS TO MAIN


| RESEARCH WITH IMPACT: CORNELL SC JOHNSON COLLEGE OF BUSINESS • 2025 EDITION


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