Christopher Severen, Federal Reserve Bank of Philadelphia

Formative experiences can shape people’s behavior for decades. We document a striking feature about those who came of driving age during the oil crises of the 1970s: they drive to work less in the year 2000. The effect is not specific to these cohorts; we exploit price variation over time and across states to show that gasoline price changes experienced between ages 15 and 18 generally shift several margins of later-life travel behavior. Effects are not explained by recessions, income, or costly skill acquisition. Instead, they likely reflect early formation of preferences for driving or persistent changes in its perceived cost. These findings are inconsistent with recency bias, habit formation, and mental plasticity. 

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