IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Expectation Formation of Older Married Couples and the Rational Expectations Hypothesis

  • Hugo Benítez-Silva

    (SUNY–Stony Brook)

  • Debra S. Dwyer

    (SUNY–Stony Brook)

This paper tests the Rational Expectations (RE) hypothesis regarding retirement expectations of married older American couples, controlling for sample selection and reporting biases. In prior research we found that individual retirement expectation formation was consistent with the Rational Expectation hypothesis, but in that work spousal considerations were not analyzed. In this research we take advantage of panel data on expectations to test the RE hypothesis among married individuals as well as joint expectations among couples. We find that regardless of whether we assume that married individuals form their own expectations taking spouse’s information as exogenous, or the reports of the couple are the result of a joint expectation formation process, their expectations are consistent with the RE hypothesis. Our results support a wide variety of models in economics that assume rational behavior for married couples.

If you experience problems downloading a file, check if you have the proper application to view it first. 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.

File URL: http://www.mrrc.isr.umich.edu/publications/Papers/pdf/wp062.pdf
Download Restriction: no

Paper provided by University of Michigan, Michigan Retirement Research Center in its series Working Papers with number wp062.

as
in new window

Length: 42 pages
Date of creation: Oct 2003
Date of revision:
Handle: RePEc:mrr:papers:wp062
Contact details of provider: Postal: P.O. Box 1248, Ann Arbor, MI 48104
Phone: (734) 615-0422
Fax: (734) 647-4575
Web page: http://www.mrrc.isr.umich.edu/publications/papers/
Email:


More information through EDIRC

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.:

as in new window
  1. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
  2. Debra S. Dwyer & Olivia S. Mitchell, . "Health Problems as Determinants of Retirement: Are Self-Rated Measures Endogenous?," Pension Research Council Working Papers 98-7, Wharton School Pension Research Council, University of Pennsylvania.
  3. Das, J.W.M. & van Soest, A.H.O., 1997. "Expected and realized income changes : Evidence from the Dutch socio-economic panel," Other publications TiSEM bdbe10dd-649c-4521-ab28-7, Tilburg University, School of Economics and Management.
  4. Blundell, Richard & Chiappori, Pierre-André & Magnac, Thierry & Meghir, Costas, 2005. "Collective Labour Supply: Heterogeneity and Nonparticipation," IZA Discussion Papers 1785, Institute for the Study of Labor (IZA).
  5. Donna B. Gilleskie & David M. Blau, 2006. "Health insurance and retirement of married couples," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(7), pages 935-953.
  6. Butler, Monika, 1999. "Anticipation effects of looming public-pension reforms," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 50(1), pages 119-159, June.
  7. B. Douglas Bernheim, 1987. "Social Security Benefits: An Empirical Study of Expectations and Realizations," NBER Working Papers 2257, National Bureau of Economic Research, Inc.
  8. Robin L. Lumsdaine & Olivia S. Mitchell, . "New Developments in the Economic Analysis of Retirement," Pension Research Council Working Papers 98-8, Wharton School Pension Research Council, University of Pennsylvania.
  9. Jeff Dominitz & Charles F. Manski, 1994. "Using Expectations Data to Study Subjective Income Expectations," Econometrics 9411003, EconWPA.
  10. Alan L. Gustman & Thomas L. Steinmeier, 1994. "Retirement in a Family Context: A Structural Model for Husbands and Wives," NBER Working Papers 4629, National Bureau of Economic Research, Inc.
  11. Hugo Benitez-Silva, 2000. "Micro Determinants of Labor Force Status Among Older Americans," Department of Economics Working Papers 00-07, Stony Brook University, Department of Economics.
  12. Schmalensee, Richard, 1976. "An Experimental Study of Expectation Formation," Econometrica, Econometric Society, vol. 44(1), pages 17-41, January.
  13. J. Dominitz & C. F. Manski, . "Eliciting student expectations of the returns to schooling," Institute for Research on Poverty Discussion Papers 1049-94, University of Wisconsin Institute for Research on Poverty.
  14. Thomas J. Sargent & Neil Wallace, 1974. "Rational expectations and the theory of economic policy," Working Papers 29, Federal Reserve Bank of Minneapolis.
  15. Blau, David M, 1998. "Labor Force Dynamics of Older Married Couples," Journal of Labor Economics, University of Chicago Press, vol. 16(3), pages 595-629, July.
  16. B. Douglas Bernheim, 1987. "The Timing of Retirement: A Comparison of Expectations and Realizations," NBER Working Papers 2291, National Bureau of Economic Research, Inc.
  17. Blau, David M., 1997. "Social security and the labor supply of older married couples," Labour Economics, Elsevier, vol. 4(4), pages 373-418, December.
  18. Blau, David M. & Riphahn, Regina T., 1998. "Labor Force Transitions of Older Married Couples in Germany," IZA Discussion Papers 5, Institute for the Study of Labor (IZA).
  19. Daniel S. Hamermesh, 2004. "Subjective Outcomes in Economics," NBER Working Papers 10361, National Bureau of Economic Research, Inc.
  20. Hugo Benitez-Silva & Frank Heiland, 2005. "Early Claiming of Social Security Benefits and Labor Supply Behavior of Older Americans," Department of Economics Working Papers 05-05, Stony Brook University, Department of Economics.
  21. Lovell, Michael C, 1986. "Tests of the Rational Expectations Hypothesis," American Economic Review, American Economic Association, vol. 76(1), pages 110-24, March.
  22. Michael D. Hurd, 1990. "The Joint Retirement Decision of Husbands and Wives," NBER Chapters, in: Issues in the Economics of Aging, pages 231-258 National Bureau of Economic Research, Inc.
  23. Stock, James H & Wright, Jonathan H & Yogo, Motohiro, 2002. "A Survey of Weak Instruments and Weak Identification in Generalized Method of Moments," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(4), pages 518-29, October.
  24. B. Douglas Bernheim, 1988. "How Do the Elderly Form Expectations? An Analysis of Responses to New Information," NBER Working Papers 2719, National Bureau of Economic Research, Inc.
  25. Michael Hurd & Monika Reti, 2003. "The Effects of Large Capital Gains on Work and Consumption: Evidence from Four Waves of the HRS," Working Papers 03-14, RAND Corporation Publications Department.
  26. Ruud, Paul A., 2000. "An Introduction to Classical Econometric Theory," OUP Catalogue, Oxford University Press, number 9780195111644, March.
  27. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
  28. Hugo Benítez-Silva & Debra S. Dwyer & Wayne-Roy Gayle & Thomas J. Muench, 2003. "Expectations in Micro Data: Rationality Revisited," Working Papers wp059, University of Michigan, Michigan Retirement Research Center.
  29. Christopher F Baum & Mark E. Schaffer & Steven Stillman, 2003. "Instrumental variables and GMM: Estimation and testing," Stata Journal, StataCorp LP, vol. 3(1), pages 1-31, March.
  30. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
  31. Richard Disney & Sarah Tanner, 1999. "What can we learn from retirement expectations data?," IFS Working Papers W99/17, Institute for Fiscal Studies.
  32. Jeff Dominitz & Charles F. Manski & Jordan Heinz, 2002. "Social Security Expectations and Retirement Savings Decisions," JCPR Working Papers 273, Northwestern University/University of Chicago Joint Center for Poverty Research.
  33. Francis Vella, 1998. "Estimating Models with Sample Selection Bias: A Survey," Journal of Human Resources, University of Wisconsin Press, vol. 33(1), pages 127-169.
  34. Phelan, Christopher, 1999. "Anticipation effects of looming public-pension reforms : A comment," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 50(1), pages 161-164, June.
  35. Steven J. Haider & Melvin Stephens, 2007. "Is There a Retirement-Consumption Puzzle? Evidence Using Subjective Retirement Expectations," The Review of Economics and Statistics, MIT Press, vol. 89(2), pages 247-264, May.
  36. Stephen Bond & Céline Nauges & Frank Windmeijer, 2002. "Unit Roots and Identification in Autoregressive Panel Data Models: A Comparison of Alternative Tests," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 C5-4, International Conferences on Panel Data.
  37. Michael Hurd & Susann Rohwedder, 2003. "The Retirement-Consumption Puzzle: Anticipated and Actual Declines in Spending at Retirement," Working Papers 03-12, RAND Corporation Publications Department.
  38. Das, J.W.M. & van Soest, A.H.O., 2000. "Expected Versus Realized Income Changes : A Test of the Rational Expectation Hypothesis," Discussion Paper 2000-105, Tilburg University, Center for Economic Research.
  39. Debra S. Dwyer & Jianting Hu, . "Retirement Expectations and Realizations: The Role of Health Shocks and Economic Factors," Pension Research Council Working Papers 98-18, Wharton School Pension Research Council, University of Pennsylvania.
  40. Hugo Benítez-Silva & Debra S. Dwyer, 2003. "What to Expect when you are Expecting Rationality: Testing Rational Expectations using Micro Data," Working Papers wp037, University of Michigan, Michigan Retirement Research Center.
  41. Gustman, Alan L & Steinmeier, Thomas L, 2000. "Retirement in Dual-Career Families: A Structural Model," Journal of Labor Economics, University of Chicago Press, vol. 18(3), pages 503-45, July.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:mrr:papers:wp062. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (MRRC Administrator)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.