Using a representative online panel from the US, we examine how individuals' macroeconomic expectations causally affect their personal economic prospects and their behavior. To exogenously vary respondents' expectations, we provide them with different professional forecasts about the likelihood of a recession. Respondents update their macroeconomic outlook in response to the forecasts, extrapolate to expectations about their personal economic circumstances and adjust their consumption plans and stock purchases. Extrapolation to expectations about personal unemployment is driven by individuals with higher exposure to macroeconomic risk, consistent with macroeconomic models of imperfect information in which people are inattentive, but understand how the economy works.
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We propose a method to measure people's subjective models of the macroeconomy. Using a sample of 2,200 households representative of the US population and a sample of more than 1,000 experts, we measure beliefs about how the unemployment rate and the inflation rate respond to four different hypothetical exogenous shocks: a monetary policy shock, a government spending shock, an income tax shock, and an oil price shock. While expert predictions are quantitatively close to benchmarks from standard DSGE models and VAR evidence and relatively homogeneous, there is strong heterogeneity among households. Households predict changes in unemployment that are largely in line with the experts' responses for all four shocks. However, their predictions of changes in inflation are at odds with those of experts both for the tax shock and the interest rate shock. We show that a substantial fraction of deviations of household predictions from expert predictions can be explained by the use of a simple heuristic according to which people expect a positive co-movement among variables they perceive as good and among variables they perceive as bad. Our findings inform the validity of central assumptions about the expectation formation process and have important implications for the optimal design of fiscal and monetary policy.
Information provision experiments allow researchers to test economic theories and answer policy-relevant questions by varying the information set available to respondents. We survey the emerging literature using information provision experiments in economics and discuss applications in macroeconomics, finance, political economy, public economics, labor economics, and health economics. We also discuss design considerations and provide best-practice recommendations on how to (i) measure beliefs; (ii) design the information intervention; (iii) measure belief updating; (iv) deal with potential confounds, such as experimenter demand effects; and (v) recruit respondents using online panels. We finally discuss typical effect sizes and provide sample size recommendations.(JEL C90, D83, D91)
Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. We examine in how far people's experiences of income inequality affect their preferences for redistribution. We use several large nationally representative datasets to provide evidence that people who have experienced more inequality while growing up are less in favor of redistribution, after controlling for income, demographics, unemployment experiences and current macro-economic conditions. They are also less likely to consider the prevailing distribution of incomes to be unfair, suggesting that inequality experiences affect the reference point about what is a fair division of overall income. Finally, we conduct an experiment to show that individuals randomly exposed to environments promoting inequality in the experience stage of the experiment redistribute less in a subsequent behavioral measure. Terms of use: Documents in EconStor mayJEL-Codes: P160, E600, Z130.
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