IQ, Expectations, and Choice
By Francesco D’acunto, Daniel Hoang, Maritta Paloviita, Michael Weber. Social Science Research Network, 2019
142 citations recorded by the source corpus.
We use administrative and survey-based micro data to study the relationship between cognitive abilities (IQ), the formation of economic expectations, and the choices of a representative male population. Men above the median IQ (high-IQ men) display 50% lower forecast errors for inflation than other men. The inflation expectations and perceptions of high-IQ men, but not others, are positively correlated over time. High-IQ men are also less likely to round and to forecast implausible values. In terms of choice, only high-IQ men increase their propensity to consume when expecting higher inflation as the consumer Euler equation prescribes. High-IQ men are also forward-looking - they are more likely to save for retirement conditional on saving. Education levels, income, socio-economic status, and employment status, although important, do not explain the variation in expectations and choice by IQ. Our results have implications for heterogeneous-beliefs models of household consumption, saving, and investment.
Subfields: Social Psychology
View Paper: https://www.semanticscholar.org/paper/2bae3c42787d4888f99a531ea3fe1f2247410e04
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In Social Psychology
Citations in the corpus
- News and uncertainty about COVID-19: Survey evidence and short-run economic impact (2020, background): “Behavioral interpretations may also support a conditional supply-side view: salience of shopping experiences drives inflation expectations as documented in Bryan and Venkatu (2001) and D’Acunto et al. (2021) .”
- The Effect of Macroeconomic Uncertainty on Household Spending (2021, background): “However, as documented in D’Acunto et al. (2021b) and elsewhere, women are more likely to do grocery and other shopping.”
- Monetary Policy Communications and Their Effects on Household Inflation Expectations (2018, unknown): “…also interested to see whether participants might have a Philips curve in mind and provided the most recent unemployment numbers as treatment (vi); D’Acunto et al. (2018) document individuals extrapolate from salient price changes to overall inflation and, hence, we informed one of the treatment…”
- Five Facts about Beliefs and Portfolios (2019, unknown): “…Malmendier and Nagel, 2011; Kuchler and Zafar, 2015; Das, Kuhnen and Nagel, 2017; Bailey et al., 2017, 2018; Coibion, Gorodnichenko and Kamdar, 2018; D’Acunto et al., 2019).48 Our results above highlight that the low R2s in these analyses is unlikely to be primarily due to classic measurement…”