Risk Behavior of East and West Germans in Handling Personal Finances

Abstract

When "Homo Economicus" stands for rationality of financial decision-making, then this is clearly an ideal state not found in real life. Instead, everyday financial decisions are made by using a number of risk-oriented behaviors, both positive and negative. We investigate the relationships between such personality traits and financial decisions following the theory of Brengelmann. We compare financial risk behavior between East and West German citizens using two kinds of samples. One type of sample is drawn from the general East and West German populations. The other is drawn from the readers of the leading business magazine in East and West Germany. It is assumed that West Germans are more risk-oriented than East Germans and that readers of the business magazine are more risk-oriented than the non-readers. The expectations were confirmed. In the general population, West Germans show higher risk excitement, but also a higher degree of strain than East Germans. East Germans are more likely to strive for property. Beyond that, business magazine readers differ from the average population. They show higher degrees of almost all relevant factors. In this subgroup, East Germans remind one of "Musterschuler" as far as handling finances is concerned: They show greater drive, control, and responsibility in financial matters, but feel less distracted than West Germans. These results may be explained by differences in socialization in the former FRG and GDR, where "capitalistic" and "socialistic" values, respectively, are supposed to have dominated theory and practice over long periods of time.