We show that there exists significant heterogeneity across US households in how uncertain they are in their expectations regarding personal and macroeconomic outcomes, and that uncertainty in expectations predicts households' choices. Individuals with lower income or education, more precarious finances, and living in counties with higher unemployment are more uncertain in their expectations regarding own-income growth, inflation, and national home price changes. People with more uncertain expectations, even accounting for their socioeconomic characteristics, exhibit more precaution in their consumption, credit, and investment behaviors.
Expectations Uncertainty and Household Economic Behavior
Itzhak Ben-David,Itzhak Ben-David,Elyas Fermand,Camelia M. Kuhnen,Geng Li
Published 2018 in National Bureau of Economic Research
ABSTRACT
PUBLICATION RECORD
- Publication year
2018
- Venue
National Bureau of Economic Research
- Publication date
2018-12-01
- Fields of study
Economics
- Identifiers
- External record
- Source metadata
Semantic Scholar
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CLAIMS
CONCEPTS
- consumption behavior
Household spending choices considered as part of precautionary responses.
Aliases: spending behavior
- county unemployment
The unemployment level in a household's county, used as a local labor-market context variable.
Aliases: local unemployment, county joblessness
- credit behavior
Household borrowing and credit-use choices considered in the paper.
Aliases: borrowing behavior
- expectations uncertainty
A measure of how uncertain households are about their forecasts for future personal and macroeconomic outcomes.
Aliases: uncertainty in expectations, expectation uncertainty
- household expectations
Households' subjective beliefs about future personal finances and broader economic conditions used in the paper's analysis.
Aliases: expectations
- inflation expectations
Households' beliefs about the future rate of inflation.
Aliases: expected inflation
- investment behavior
Household portfolio and investment choices considered in the paper.
Aliases: asset allocation behavior
- national home price change expectations
Households' beliefs about future changes in national home prices.
Aliases: home price expectations, expected national home prices
- own-income growth expectations
Households' expected future change in their own income.
Aliases: income growth expectations, expected income growth
- precautionary behavior
More cautious economic decision-making by households in spending, borrowing, and investing.
Aliases: precaution
- socioeconomic characteristics
Household background and financial attributes such as income, education, and financial precarity used as correlates in the paper.
Aliases: SES, socioeconomic factors
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