Expectation Formation of Older Married Couples and the Rational Expectations Hypothesis

Hugo Benitez-Silva and Debra Dwyer ()

Working Papers from University of Michigan, Michigan Retirement Research Center

Abstract: This paper tests the Rational Expectations (RE) hypothesis regarding retirement expectations of married older American couples, controlling for sample selection and reporting biases. In prior research we found that individual retirement expectation formation was consistent with the Rational Expectation hypothesis, but in that work spousal considerations were not analyzed. In this research we take advantage of panel data on expectations to test the RE hypothesis among married individuals as well as joint expectations among couples. We find that regardless of whether we assume that married individuals form their own expectations taking spouse’s information as exogenous, or the reports of the couple are the result of a joint expectation formation process, their expectations are consistent with the RE hypothesis. Our results support a wide variety of models in economics that assume rational behavior for married couples.

Pages: 42 pages
Date: 2003-10
New Economics Papers: this item is included in nep-lab
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Journal Article: Expectation formation of older married couples and the rational expectations hypothesis (2006)
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