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Macroeconomic Conditions and Updating of Expectations by Older Americans

Author

Listed:
  • Purvi Sevak

    (Hunter College)

  • Lucie Schmidt

    (Williams College)

Abstract

Economic theory suggests that individual decisions about consumption, saving, and labor supply should be directly linked to subjective expectations about future events. This project uses panel data from the Health and Retirement Study from 1994-2008 merged to data on a number of local and high frequency macroeconomic indicators to estimate how individual expectations respond to fluctuations in the local and national macroeconomy. Our results suggest that individuals revise their expectations in response to both local and national macroeconomic fluctuations in ways that appear to make sense, and that this is stronger for respondents with higher levels of education.

Suggested Citation

  • Purvi Sevak & Lucie Schmidt, 2011. "Macroeconomic Conditions and Updating of Expectations by Older Americans," Working Papers wp259, University of Michigan, Michigan Retirement Research Center.
  • Handle: RePEc:mrr:papers:wp259
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    File URL: http://www.mrrc.isr.umich.edu/publications/Papers/pdf/wp259.pdf
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    References listed on IDEAS

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    1. Michael D. Hurd & Monika Reti & Susann Rohwedder, 2009. "The Effect of Large Capital Gains or Losses on Retirement," NBER Chapters,in: Developments in the Economics of Aging, pages 127-163 National Bureau of Economic Research, Inc.
    2. Purvi Sevak, 2002. "Wealth Shocks and Retirement Timing: Evidence from the Nineties," Working Papers wp027, University of Michigan, Michigan Retirement Research Center.
    3. Jeff Dominitz, 1998. "Earnings Expectations, Revisions, And Realizations," The Review of Economics and Statistics, MIT Press, vol. 80(3), pages 374-388, August.
    4. 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.
    5. Basit Zafar, 2011. "How Do College Students Form Expectations?," Journal of Labor Economics, University of Chicago Press, vol. 29(2), pages 301-348.
    6. Adeline Delavande, 2008. "Measuring revisions to subjective expectations," Journal of Risk and Uncertainty, Springer, vol. 36(1), pages 43-82, February.
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    Cited by:

    1. Cahill, Kevin E. & McNamara, Tay K. & Pitt-Catsouphes, Marcie & Valcour, Monique, 2015. "Linking shifts in the national economy with changes in job satisfaction, employee engagement and work–life balance," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 56(C), pages 40-54.
    2. Donald Haurin & Chao Ma & Stephanie Moulton & Maximilian Schmeiser & Jason Seligman & Wei Shi, 2016. "Spatial Variation in Reverse Mortgages Usage: House Price Dynamics and Consumer Selection," The Journal of Real Estate Finance and Economics, Springer, vol. 53(3), pages 392-417, October.

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