Can households see into the future? Survey evidence from the Netherlands
Baptiste Massenot and
Yuri Pettinicchi ()
Journal of Economic Behavior & Organization, 2019, vol. 164, issue C, 77-90
This paper presents new evidence on the expectation formation process from a Dutch household survey. Households become too optimistic about their future income after their income has improved, consistent with the overextrapolation of their experience. We show that this effect of experience is persistent and that households overextrapolate income losses more than income gains. Furthermore, older households overextrapolate more, suggesting that they did not learn over time to form more accurate expectations. Finally, we study the relationship between expectation errors and consumption. We find that more overoptimistic households intend to consume more and subsequently report higher consumption, even though they do not consume as much as they intended to. These results suggest that overextrapolation hurts consumers and amplifies business cycles.
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
Working Paper: Can households see into the future? Survey evidence from the Netherlands (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:164:y:2019:i:c:p:77-90
Access Statistics for this article
Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.
More articles in Journal of Economic Behavior & Organization from Elsevier
Bibliographic data for series maintained by Haili He ().