Three Essays on Expectations

TitleThree Essays on Expectations
Publication TypeThesis
Year of Publication2007
AuthorsPerry, MM
Date Published2007
UniversityUniversity of Michigan
KeywordsAdult children, Consumption and Savings, Expectations
Abstract

Expectations play a major role in much economic modeling. Due to the difficulty in measuring them, however, they have played a smaller role in empirical economics. In this dissertation I use measurements of expectations from the Health and Retirement Study to examine several questions that could not otherwise be examined. In the first chapter, I examine three aspects of beliefs about future inheritances: their determinants, accuracy and effects. I find that these beliefs respond reasonably to outside factors, such as the death of a parent. I find that they are not extremely accurate and appear to contain measurement error. Finally, I find little evidence that inheritance expectations affect retirement behavior, but some evidence that an inheritance itself makes a person more likely to retire. In the second chapter, I concentrate on the effects of an inheritance on retirement behavior, with an emphasis on unexpected inheritances. I present a model of retirement demonstrating how an inheritance might lead someone to retire sooner and how an unexpected inheritance should have a larger observed effect than an expected one. Empirically, I confirm that those who receive inheritances do have a higher probability of retiring immediately than those who do not, but I cannot confirm that unexpected inheritances have a larger effect. In chapter three, I test the simple prediction, arising from a lifecycle model with no annuitization, that the slope of consumption over time should be positively correlated with a person's longevity expectations. I tentatively confirm that this is so for coupled individuals--particularly those with higher levels of education. The analysis is significantly hindered by measurement error in consumption measures.

Endnote Keywords

Consumption

Endnote ID

18580

Short TitleThree Essays on Expectations
Citation Key6050