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Subjective Income Expectations and Income Risk

Author

Listed:
  • Ramos, Xavier

    (Universitat Autònoma de Barcelona)

  • Schluter, Christian

    (University of Southampton)

Abstract

In the context of income dynamics, we investigate whether aspects of agents’ superior information relative to the econometrician’s limited information are captured in subjective expectations data. It is natural, for instance, to assume that the econometrician cannot observe idiosyncratic shocks to both permanent and transitory components of income. In this case perceptions of risk differ between agents and the econometrician. Our tests are based on panel data elicited yearly from British households. We find evidence of superior information consistent with standard income modelling.

Suggested Citation

  • Ramos, Xavier & Schluter, Christian, 2006. "Subjective Income Expectations and Income Risk," IZA Discussion Papers 1950, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp1950
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    References listed on IDEAS

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    Cited by:

    1. Sanghamitra Bandyopadhyay & Frank A Cowell, 2007. "Modelling Vulnerability in the UK," STICERD - Distributional Analysis Research Programme Papers 89, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    2. Tufan Ekici, 2016. "Subjective Financial Distress in the Formation of Consumer Confidence: Evidence from Novel Household Data," Bogazici Journal, Review of Social, Economic and Administrative Studies, Bogazici University, Department of Economics, vol. 30(2), pages 11-36.

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    More about this item

    Keywords

    subjective expectation reports; income risk; limited information variances;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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