Consumption and Saving Balances of the Elderly: Experimental Evidence on Survey Response Bias

A prerequisite for understanding the economic behavior of the elderly, and
the impacts of public policy on their health and well-being, is accurate data on
key economic variables such as income, consumption, and assets, as well as
on expectations regarding future economic and demographic events such as
major health costs, disabilities, and death. Standard practice is to elicit such
information in economic surveys, relying on respondents’ statements regarding
the variables in question.
Economists are generally aware that stated responses are noisy. Item nonresponse is a common problem, and carefully done surveys are designed to minimize it. Well-designed analyses of economic survey data are careful about
detecting implausible outliers, imputing missing values, and correcting for
selection caused by dropping missing observations. Circumstances are recognized that tend to produce systematic biases in response, such as telescoping
in recall of past events that arises from the psychophysical perception of time
intervals, or overstatement of charitable contributions that arises from the incentive to project a positive self-image. Nevertheless, economic studies are often too sanguine about the reliability of subjects’ statements regarding objective economic data.