Subjective expectation, expected investment return and investment decisions: market imperfections and misperceptions in rural India

Lead Research Organisation: Institute for Fiscal Studies
Department Name: IFS Research Team

Abstract

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Publications

10 25 50
 
Description In this study, we analyze data on subjective expectations that have been elicited from respondents to a survey. The hypothesis of this study was that the information the agents possess and the beliefs they have determine the possible outcomes foreseen and their subjective probabilities.
We find that examination of subjective expectations is instructive about the accuracy of these expectations. Detailed analysis gives confidence that answers provided reflect the respondent's believes, which allows us to link expectations to respondents' characteristics, gaining further evidence for their accuracy.
Nevertheless, we find expectations about hypothetical outcomes (s.a. investment returns for respondents who did not make the investment) not credible and ascribe this to missing information rather than wrong expectation given that non-hypothetical expectations are found to be sensible.
Exploitation Route The (non-hypothetical) subjective expectations can be used to analyze income formation processes. We do so in a new project, providing strong support that income is persistent in the studied setting.
This work has led to further projects that use the subjective expectation data to show how to identify the parameters of a standard dynamic model using a single cross section only. We however further show that this standard model is strongly rejected in our data, proposing a more flexible (non-linear) model.
Sectors Other

 
Description Improving productivity in developing countries: Identifying bottlenecks and obstacles to investments and technology adoption
Amount £309,441 (GBP)
Funding ID ES/J009253/1 
Organisation Economic and Social Research Council 
Sector Public
Country United Kingdom
Start 03/2012 
End 08/2015
 
Description Subjective expectations and income processes of micro finance clients in India 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Other academic audiences (collaborators, peers etc.)
Results and Impact Presentation given at the Workshop on "Microfinance's Contribution to Development Studies. What Interdisciplinary Approaches Add to Microfinance Understanding?"



More or less the same presentation was given at the Economics Seminar Series of the Hariot Watt University, Edinburgh on the 5th of March 2010 (http://www.sml.hw.ac.uk/research/economics/index.html)

Presentation given at the Workshop on "Microfinance's Contribution to Development Studies. What Interdisciplinary Approaches Add to Microfinance Understanding?"
Year(s) Of Engagement Activity 2010
 
Description This grant led to a collaboration between Orazio Attanasio, Manuel Arrelano, Britta Augsburg and Sam Crossman on a new academic paper. This was among other presented at a "Workshop on Subjective Expectations", organised by MiSoC. 
Form Of Engagement Activity A formal working group, expert panel or dialogue
Part Of Official Scheme? No
Geographic Reach Local
Primary Audience Other audiences
Results and Impact This grant led to a collaboration between Orazio Attanasio, Manuel Arrelano, Britta Augsburg and Sam Crossman on a new academic paper. This was among other presented at a "Workshop on Subjective Expectations", organised by MiSoC.
Year(s) Of Engagement Activity 2020