Subjective expectations about future income changes are analyzed, using household panel data. The models used are extensions of existing binary choice panel data models to the case of ordered response. We consider both random and fixed individual effects. The random effects model is estimated by maximum likelihood. The fixed effects model is estimated by combining conditional fixed effects logit estimates using minimum distance. We find that income change expectations strongly depend on realized income changes in the past: those whose income fell, are more pessimistic than others, while those whose income rose are more optimistic. Expected income changes are also significantly affected by employment status and family composition. Using the same type of models, subjective expectations are then confronted with the head of household's ex post perception of the realized income change for the same period. The main finding is that households whose income has decreased in the past underestimate their future income growth.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number
75.
Find related papers by JEL classification: D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.) This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.