Can Experiencing a Disaster Alter Spending Habits?
New research in China suggests earthquake survivors tend to spend more on entertainment and instantly gratifying activities while cutting back on education expenses

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China has seen some of the most destructive earthquakes in history. For example, the devastating 2008 Earthquake in Sichuan province killed over 69,000 people, left up to 11 million people homeless and caused up to US$20 billion in property damage. The country sits atop seismically active areas, and it had 118 earthquakes in the past year. This setting provided the backdrop for a group of researchers to look at whether near-death experiences, such as major earthquakes, can influence people’s spending patterns. They found that those who experienced major earthquakes early in life are more likely to “live in the moment” after a traumatic experience.
Jaimie Lien, Assistant Professor of Business Economics in the Department of Decision Sciences and Managerial Economics at The Chinese University of Hong Kong (CUHK) Business School and her collaborators became interested in how major earthquakes in China affect people’s spending preferences.
“Can a life-altering experience affect our outlook on life and change our spending priorities? When people get married, have a child, or retire, they often change their values and lifestyles, which consequently affect how they spend money,” she says, “but what about for life events beyond our own control, such as natural disasters?”
The study “Major Earthquakes Experience and Presently-Gratifying Expenditures” was conducted by Prof. Lien, Prof. Qingqing Peng at Chongqing Technology and Business University and Prof. Jie Zheng at Tsinghua University. The researchers found that people with direct experience of major earthquakes tend to spend significantly more on travel and entertainment, luxury goods and health products after experiencing an earthquake while spending less on education.
“Chengdu in Sichuan province is a great example and was a source of inspiration for our study. The city is known for its laid-back lifestyle and its people are famous for their leisurely pace, but at the same time, it is also in a region that is prone to recurring catastrophic earthquakes,” Prof. Lien says.
The researchers reached their findings after examining the major earthquakes that occurred in all of China from 1920 to 2008 and how it correlated with urban household spending from 2002 to 2009. They compared the spending patterns of families whose head of household was living in an earthquake-stricken area before a major earthquake and those that settled or were born in the area only after the major earthquake had passed.