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Have You Heard the News? How Real-Life Expectations React to Publicity

  • van der Wiel, Karen

    ()

    (CPB Netherlands Bureau for Economic Policy Analysis)

As evidence is accumulating that subjective expectations influence behavior and that these expectations are sometimes biased, it becomes policy-relevant to know how to influence individuals' expectations. Information in the media is likely to affect how people picture the future. This paper studies the role of public information dissemination, or publicity, in a real-life expectations formation process. For this purpose, an exceptional Dutch dataset on monthly expectations regarding the future eligibility age for old age social security is analyzed. On average, the publicity reaction in eligibility age expectations is small but the differences among subgroups are considerable. I find that higher educated and high income groups hardly adapt their expectations to relevant publicity. On the contrary, those who do not often read a newspaper have a relatively high publicity reaction. A potential explanation for this latter finding is that these groups have low quality initial expectations. If this is true, publicity thus particularly benefits the initially worse informed groups.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4064.

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Length: 47 pages
Date of creation: Mar 2009
Date of revision:
Handle: RePEc:iza:izadps:dp4064
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  1. William A. Branch, 2004. "The Theory of Rationally Heterogeneous Expectations: Evidence from Survey Data on Inflation Expectations," Economic Journal, Royal Economic Society, vol. 114(497), pages 592-621, 07.
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