Subjective Income Expectations and Income Risk

Xavi Ramos and Christian Schluter ()
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Christian Schluter: University of Southampton

No 1950, IZA Discussion Papers from IZA Network @ LISER

Abstract: In the context of income dynamics, we investigate whether aspects of agents’ superior information relative to the econometrician’s limited information are captured in subjective expectations data. It is natural, for instance, to assume that the econometrician cannot observe idiosyncratic shocks to both permanent and transitory components of income. In this case perceptions of risk differ between agents and the econometrician. Our tests are based on panel data elicited yearly from British households. We find evidence of superior information consistent with standard income modelling.

Keywords: subjective expectation reports; income risk; limited information variances (search for similar items in EconPapers)
JEL-codes: D12 D31 D84 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2006-01
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Citations: View citations in EconPapers (2)

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