Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:

 

Economic recovery is stronger in states where people are more optimistic, says UM study

26.05.2011
Economic recessions are weaker, expansions are stronger, and economic recovery is faster in U.S. states where people are more optimistic says a new study from the University of Miami School of Business Administration. Further, the effects are stronger in states where people are older, less educated and less socially connected.

"Previous studies have shown that economic conditions affect mood – people would expect this, it's more obvious," said Alok Kumar, the Gabelli Asset Management Professor of Finance at the University of Miami School of Business and one of the study's researchers. "Our study is unique in that it shows, for the first time, that mood and optimism can directly affect overall economic activity."

In order to determine the link between mood and economic conditions, Kumar, along with Vidhi Chhaochharia and George Korniotis, assistant professors of finance, used several factors to measure mood, optimism and pessimism not influenced by the economic environment. The factors are:

Weather: Average temperature and cloud cover. Sunny weather triggers the release of serotonin in the brain that causes people to be more alert and cheerful. The opposite is true for bad weather because it releases melatonin that makes people feel tired and down.

Political Affiliation and Climate: The level of optimism is greater in a region where the local population favors the political parties in power.

Sports-Related Optimism: People are likely to be more optimistic if their local sports teams have performed well (e.g., wins the Super Bowl or World Series.)

With these factors in mind, the researchers then studied how mood in a U.S. state affects local economic activity. To measure local economic performance, they created a novel index based on state housing conditions, the difference between state unemployment and national unemployment, and income growth. Here are the key findings:

Peoples' overall good mood and positive outlook can make the impact of a recession weaker, shorter in length and easier to get over.

Moderate optimism induced by the weather is good for the local economy. A state that is 10 degrees warmer experiences increased economic activity that, on average, is 26 percent stronger. It also experiences recessions that are, on average, 33 percent weaker.

Mood affects local economic activity in part because it leads to higher retail sales.

These results are surprising because they imply that the economy is affected by non-economic, psychological factors. In an ideal world, mood, would not affect economic activity and retail sales because consumers would only spend more when their income was on the rise versus because the weather is pleasant.

The impact of mood on economic activity is greater in states where people are older, less educated, less socially connected and therefore more prone to the psychological effects of mood.

"One policy implication of our study is that the development of sports-related infrastructures, like new sports stadiums or other factors that could effect the performance of local sports teams, is certainly something to consider as a way to make a real impact on a local economy for a relatively low cost," said Kumar.

NOTE TO EDITORS: A short video of Professor Alok Kumar discussing the research is available at: http://www.youtube.com/watch?v=O2vII6MaSrE.

Media Contact: Tracy Simon
University of Miami School of Business Administration
267-679-2774
tsimon@bus.miami.edu or tlsimonPR@gmail.com

UM Media Relations | EurekAlert!
Further information:
http://www.miami.edu

More articles from Studies and Analyses:

nachricht Multi-year study finds 'hotspots' of ammonia over world's major agricultural areas
17.03.2017 | University of Maryland

nachricht Diabetes Drug May Improve Bone Fat-induced Defects of Fracture Healing
17.03.2017 | Deutsches Institut für Ernährungsforschung Potsdam-Rehbrücke

All articles from Studies and Analyses >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: Giant Magnetic Fields in the Universe

Astronomers from Bonn and Tautenburg in Thuringia (Germany) used the 100-m radio telescope at Effelsberg to observe several galaxy clusters. At the edges of these large accumulations of dark matter, stellar systems (galaxies), hot gas, and charged particles, they found magnetic fields that are exceptionally ordered over distances of many million light years. This makes them the most extended magnetic fields in the universe known so far.

The results will be published on March 22 in the journal „Astronomy & Astrophysics“.

Galaxy clusters are the largest gravitationally bound structures in the universe. With a typical extent of about 10 million light years, i.e. 100 times the...

Im Focus: Tracing down linear ubiquitination

Researchers at the Goethe University Frankfurt, together with partners from the University of Tübingen in Germany and Queen Mary University as well as Francis Crick Institute from London (UK) have developed a novel technology to decipher the secret ubiquitin code.

Ubiquitin is a small protein that can be linked to other cellular proteins, thereby controlling and modulating their functions. The attachment occurs in many...

Im Focus: Perovskite edges can be tuned for optoelectronic performance

Layered 2D material improves efficiency for solar cells and LEDs

In the eternal search for next generation high-efficiency solar cells and LEDs, scientists at Los Alamos National Laboratory and their partners are creating...

Im Focus: Polymer-coated silicon nanosheets as alternative to graphene: A perfect team for nanoelectronics

Silicon nanosheets are thin, two-dimensional layers with exceptional optoelectronic properties very similar to those of graphene. Albeit, the nanosheets are less stable. Now researchers at the Technical University of Munich (TUM) have, for the first time ever, produced a composite material combining silicon nanosheets and a polymer that is both UV-resistant and easy to process. This brings the scientists a significant step closer to industrial applications like flexible displays and photosensors.

Silicon nanosheets are thin, two-dimensional layers with exceptional optoelectronic properties very similar to those of graphene. Albeit, the nanosheets are...

Im Focus: Researchers Imitate Molecular Crowding in Cells

Enzymes behave differently in a test tube compared with the molecular scrum of a living cell. Chemists from the University of Basel have now been able to simulate these confined natural conditions in artificial vesicles for the first time. As reported in the academic journal Small, the results are offering better insight into the development of nanoreactors and artificial organelles.

Enzymes behave differently in a test tube compared with the molecular scrum of a living cell. Chemists from the University of Basel have now been able to...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

Event News

International Land Use Symposium ILUS 2017: Call for Abstracts and Registration open

20.03.2017 | Event News

CONNECT 2017: International congress on connective tissue

14.03.2017 | Event News

ICTM Conference: Turbine Construction between Big Data and Additive Manufacturing

07.03.2017 | Event News

 
Latest News

Argon is not the 'dope' for metallic hydrogen

24.03.2017 | Materials Sciences

Astronomers find unexpected, dust-obscured star formation in distant galaxy

24.03.2017 | Physics and Astronomy

Gravitational wave kicks monster black hole out of galactic core

24.03.2017 | Physics and Astronomy

VideoLinks
B2B-VideoLinks
More VideoLinks >>>