Home > Publications . Search All . Browse All . Country . Browse PSC Pubs . PSC Report Series

PSC In The News

RSS Feed icon

Weir's 2009 report on NFL brain injuries got more attention than neurological findings published in 2005

Edin and Shaefer's book a call to action for Americans to deal with poverty

Weir says pain may underlie rise in suicide and substance-related deaths among white middle-aged Americans


MCubed opens for new round of seed funding, November 4-18

PSC News, fall 2015 now available

Barbara Anderson appointed chair of Census Scientific Advisory Committee

John Knodel honored by Thailand's Chulalongkorn University

Next Brown Bag

Monday, Dec 7 at noon, 6050 ISR-Thompson
Daniel Eisenberg, "Healthy Minds Network: Mental Health among College-Age Populations"

Melvin Stephens, Jr photo

Job loss expectations, realizations, and household consumption behavior

Publication Abstract

Stephens, Jr., Melvin. 2004. "Job loss expectations, realizations, and household consumption behavior." Review of Economics and Statistics, 86(1), 253-269.

Although the theoretical importance of expectations in decision-making is well known to economists, only a few empirical. papers investigate the impact of individual subjective expectations on economic outcomes. This paper examines the link between expectations of future job losses and the subsequent impact that these expectations have on household consumption behavior. The first part of the paper documents the empirical relationship between job loss expectations and subsequent job losses. Subjective job loss expectations have significant predictive power in explaining future job losses even when standard demographic information known to be associated with the prevalence of job displacement is included in the analysis. Furthermore, higher subjective job loss probabilities are correlated with an increased expectation of future earnings declines. Overall, these results indicate that the variable for subjective job loss expectations is a meaningful predictor of subsequent displacement. Since a job displacement results in large and persistent earnings losses, job loss expectations should have an important impact on household consumption smoothing following a job loss. The second part of the paper finds that although a job loss significantly reduces household consumption, there is little evidence that the degree to which households anticipate job losses reduces the impact of displacement on consumption. Alternative models of interpreting responses to expectations questions and of household consumption behavior that may explain these results are discussed.

DOI:10.1162/003465304323023796 (Full Text)

Licensed Access Link

Browse | Search : All Pubs | Next