Measuring Subjective Expectations in Developing Countries : A Critical Review and New Evidence
The majority of economic decisions taken by individuals are forward looking and thus involve their expectations of future outcomes. Understanding the expectations that individuals have is thus of crucial importance to designing and evaluating polic...
| Main Authors: | , , |
|---|---|
| Language: | English |
| Published: |
2012
|
| Subjects: | |
| Online Access: | http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20090129100701 http://hdl.handle.net/10986/4021 |
| Summary: | The majority of economic decisions taken
by individuals are forward looking and thus involve their
expectations of future outcomes. Understanding the
expectations that individuals have is thus of crucial
importance to designing and evaluating policies in health,
education, finance, migration, social protection, and many
other areas. However, the majority of developing country
surveys are static in nature and do not contain information
on the subjective expectations of individuals. Possible
reasons given for not collecting this information include
fears that poor, illiterate individuals do not understand
probability concepts, that it takes far too much time to ask
such questions, or that the answers add little value. This
paper provides a critical review and new analysis of
subjective expectations data from developing countries and
refutes each of these concerns. The authors find that people
in developing countries can generally understand and answer
probabilistic questions, such questions are not prohibitive
in time to ask, and the expectations are useful predictors
of future behavior and economic decisions. The paper
discusses the different methods being tried for eliciting
such information, the key methodological issues involved,
and the open research questions. The available evidence
suggests that collecting expectations data is both feasible
and valuable, suggesting that it should be incorporated into
more developing country surveys. |
|---|