NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

How Do the Elderly Form Expectations? An Analysis of Responses to New Information

B. Douglas Bernheim

NBER Working Paper No. 2719
Issued in September 1988
NBER Program(s):AG, PE

In this paper, I outline and test a simple theory that describes the evolution of expectations concerning social security benefits during the pre-retirement period. After correcting for the presences of measurement error, I obtain results that are consistent with this theory: expectations appear to evolve as a random walk, and innovations in this process are unrelated to previously available information. I also estimate responses of expectations to the arrival of new information. Although previous research indicates that individuals do not form expectations on the basis of all available information (and in particular ignore much of the information contained in concurrent statutory entitlements to social security benefits), responses to new information during the period immediately preceding retirement appear to be highly rational. The bulk of information affects the evolution of expectations only through its impact on actual benefit calculations. Furthermore, the data support the view that individuals form accurate assessments of the ultimate impact of new information on actual benefits.

download in pdf format
   (457 K)

email paper

The NBER Bulletin on Aging and Health provides summaries of publications like this.  You can sign up to receive the NBER Bulletin on Aging and Health by email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w2719

Published: How Do the Elderly Form Expectations? An Analysis of Responses to New Information, B. Douglas Bernheim. in Issues in the Economics of Aging, Wise. 1990

Users who downloaded this paper also downloaded* these:
Bernheim How Do the Elderly Form Expectations? An Analysis of Responses to New Information
Bernheim w2257 Social Security Benefits: An Empirical Study of Expectations and Realizations
Mitchell and Fields w0772 The Effects of Pensions and Earnings on Retirement: A Review Essay
Whalley and Zhang w12780 State-Owned Enterprise Behaviour Responses to Trade Reforms: Some Analytics and Numerical Simulation Results Using Chinese Data
Bernheim w2291 The Timing of Retirement: A Comparison of Expectations and Realizations
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us