Abstract

Historical institutionalists have long argued that major events can shape long-term economic perceptions, but the identification of birth-cohort differences has been stymied by methodological difficulties, notably the APC problem. Taking advantage of unique Japanese data and tailored Bayesian modeling, we identify cohort effects in economic perceptions and show that they follow objective macroeconomic trends countercyclically. Cohorts whose formative ages (16–20) overlap with high GDP growth have more pessimistic views about the current and future economy, even in later years. We argue that a strong economy during one's youth raises baseline expectations and makes later, weaker growth appear disappointing. We further find partisan differences in cohort effects, particularly on prospective economic expectations, with greater pessimism among independents and supporters of opposition parties.