Household Expectations and Decisions: Causal Evidence

This award funds research in macroeconomics. The research team will combine a large-scale repeated survey of US consumers with information treatments and external information on decision making. They will use these data to consider four research questions in macroeconomics. The first is mechanisms underlying wage-price spirals, where general increases in prices (inflation) lead workers to bargain for higher wages, which in turn increases business costs and results in further upward pressure on prices. Secondly, the PI team will consider how different kinds of economic uncertainty affect household spending and managerial decisions. Third, the team will track how people start to pay attention to price changes (inflation) over time. Fourth, the team will use the data to consider how household expectations about bank stability affect deposit decisions. The project includes a methodological component. The team explores possible alternatives to randomized controlled trials for research that seeks to understand how beliefs affect decisions. They develop an alternative to randomized controlled trials that uses hypothetical questions in a survey to see if they can recover the same effects. The team also considers whether or not laboratory decision-making experiments can serve as an alternative to full blown randomized controlled trials in surveys. The four specific macroeconomic research questions are each important for understanding the effect of expectations and information on macroeconomic dynamics. This award reflects NSF's statutory mission and has been deemed worthy of support through evaluation using the Foundation's intellectual merit and broader impacts review criteria.