Collective Remembrance and Private Choice: German-Greek Conflict And

Collective Remembrance and Private Choice: German-Greek Conflict and Consumer Behavior in Times of Crisis∗ Vasiliki Foukay Hans-Joachim Vothz February 2020 Abstract How is collective memory formed and when does it impact behavior? During World War II, German troops occupying Greece carried out numerous massacres, often as reprisals for partisan attacks. During the 2009 Greek sovereign debt crisis, political conflict erupted between the German and Greek governments; German car sales in Greece declined. Re- ductions were greatest in areas affected by German reprisals. Differential economic perfor- mance did not drive this divergence. Instead, survey evidence and an IV-strategy predict- ing the geography of German attacks suggest that current events reactivated past memories, creating a backlash against German products in reprisal areas. Using quasi-random variation in official public recognition of a town’s victim status, we show that the insti- tutionalization of collective memory amplifies effects of time-varying political conflict on consumer behavior. Keywords: collective memory, political conflict, consumer behavior. JEL Codes: D12, D74, F14, N14, N44. ∗For helpful suggestions we thank Alexander Apostolides, Leo Bursztyn, Bruno Caprettini, Ray Fisman, Nicola Gennaioli, Luigi Guiso, Yannis Ioannides, Emir Kamenica, Tim Leunig, Sara Lowes, John Marshall, Guy Michaels, Stelios Michalopoulos, Nathan Nunn, Sonal Pandya, Elias Papaioannou, Luigi Pascali, Giacomo Ponzetto, Dominic Rohner, Guido Tabellini, and Nico Voigtlaender. Seminar participants at Bocconi, CREI, Ente Einaudi, Harvard, UPF, Columbia, LSE, the Workshop on Political Conflict in Washington University in St. Louis, the 2017 Zurich Conference on Origins and Consequences of Group Identities, the EREH-London conference, and the 12th Conference on Research on Economic Theory and Econometrics in Naxos provided useful advice. The Hellenic Statistical Authority kindly provided car registration data. Evangelia Mathopoulou provided excellent research assistance. yStanford University. Email: [email protected]. zUniversity of Zurich. Email: [email protected]. 1 1 Introduction Every human being remembers events. In contrast, collective memory is not based on per- sonal recollections. The importance of distant events is typically passed from generation to generation through acts of public remembrance and the teaching of history, using symbolic “sites of memory”.1 Collective memory functions as “mythical glue” (Harari, 2014), help- ing humans to collaborate in large groups of genetically unrelated individuals by becoming members of “imagined communities” (Anderson, 1983). While collective memory is a constant of human society, it is unclear how collective memories are created, when they matter, and whether they can affect major economic decisions. Dessi (2008) presents a model of how collective memory binds nations together, emphasizing benefits for economic co-operation. Benabou´ and Tirole (2011) study the in- teraction between memory and identity, arguing that memories allow people to infer who they are and what to do in a given situation. Despite theory highlighting the importance of collective memory for individual and collective outcomes, there is no compelling empirical evidence that changes in economic behavior can be driven by collective memories, or how these memories come to matter. In this paper, we examine the creation and re-activation of collective memory and its effects in a high-stakes setting. During Greece’s military occupation by Germany in World War II, German armed forces committed numerous war crimes, including mass executions and the complete destruction of entire villages. This violence was typically carried out in retaliation for local partisan attacks (Mazower, 1995). Decades later, during the sovereign debt crisis of 2009–2014, political relations between the German and Greek government once again turned acrimonious. Under EU and German pressure, Greece had to implement stringent austerity measures. German newspapers were quick to blame “lazy Southern- ers” for the Euro debt crisis. As public discord erupted between the German and Greek governments, memories of Germany’s violent occupation of Greece during World War II resurfaced: Greek demonstrators waved placards of Angela Merkel in Nazi uniform, and consumer groups called for a boycott of German products. To examine how collective memory interacted with contemporary political conflict to influence major economic decisions, we focus on car sales. Cars are “big ticket items”, rep- resenting a major expense for consumers. They are also an iconic German product. We analyze variation in car sales over time and across prefectures in Greece and ask: Did Ger- man car sales during the debt crisis decline more in areas that suffered German reprisals during World War II – and especially in those that received official recognition as “martyred” towns? Using original sources and secondary historiography, we construct a dataset of the uni- 1“lieux de mémoire”, in the parlance of French historian Pierre Nora (1989). Examples include official holidays, mythical founders, monuments, sites of heroic struggle (for example, Masada) and symbolic figures such as Uncle Sam in the US or Marianne in France (Akerlof and Kranton, 2011). 2 verse of Greek towns that experienced German reprisals during World War II. We collect information on the level of destruction experienced by these towns from government docu- ments, and combine this information with data on new car registrations. Using a machine learning algorithm analyzing the online archive of Greece’s largest newspaper, we compile a time-varying measure of political conflict between Greece and Germany. In addition, we conduct a survey collecting individual-level data from a sample of over 900 households in towns that experienced reprisals, and a set of control locations. Figure 1 displays our main result. The dotted line tracks the level of animosity between Germany and Greece based on our newspaper-based measure. As the debt crisis wors- ened, conflict surged, with months of peak conflict in early 2010 and the summer of 2012. The solid line shows the difference in German market share between prefectures with and without reprisals. From the two time series, it is evident that heightened public conflict between Germany and Greece coincided with lower German market shares in high- relative to low-suffering prefectures. Panel regressions confirm the pattern: the greater the share of reprisal towns in a prefecture, the greater the decline in market share for German producers in times of German-Greek conflict. Two factors may confound our results: the differential time-varying impact of the crisis, and the persistent effect of cultural characteristics of locations. To address the first concern, we show that our findings are robust to accounting for a potential differential effect of the crisis in reprisal-affected prefectures. We control for prefecture-level baseline economic controls interacted with our time-variant measure of German-Greek conflict, as well as for a country-level measure of monthly unemployment interacted with our prefecture-level measure of German atrocities. In addition to standard economic controls, we also use prefecture-level changes in nighttime luminosity, to proxy for GDP changes at the regional level. Results are robust to including these variables, as well as a measure of economic uncertainty for Greece (based on the method in Baker, Bloom, and Davis (2016)), which we allow to have differential effects across prefectures. Our results are also robust to excluding luxury cars from the analysis. Survey data provides additional evidence that results are not driven by a differential downturn in economic conditions. Residents in reprisal towns do not only buy fewer Ger- man cars – they also name German brands less often as their “ideal” car. In other words, Greeks in martyred towns do not buy fewer German cars because they cannot afford them; they fail to do so because they like them less. Strikingly, results are stronger for Greeks born in massacred towns; and they are strongest for those whose parents and grandparents already lived in the same location, making it more likely that family members were affected by German war crimes. Since the descendants of long-time inhabitants share the same economic environment as more recent arrivals, but dislike German cars more, it is likely that the past is shaping their attitudes – and not recent economic shocks. Also, in line with an interpretation of a differential backlash against German products, Greeks in reprisal towns view German policies during the crisis more negatively – they are more likely to blame Germany for the Greek sovereign debt crisis. 3 We next address the concern that German atrocities could simply reflect more deeply- rooted differences between Greek towns. For example, towns and villages with strong nationalist sentiment may have resisted the WWII occupation more vigorously – leading to reprisals. If this nationalist sentiment persisted after 1945, it could then map into a greater backlash against German products today. Such underlying characteristics – and not the memory of reprisals – could then drive differential reactions during the debt crisis. We provide three pieces of evidence against this argument. First, we analyze the geography of Greek armed resistance to isolate plausibly exogenous variation in the location of reprisals. Our instrumental variable strategy relies on the fact that

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