Measuring Subjective Expectations in Developing Countries: A Critical Review and New Evidence

35 Pages Posted: 20 Apr 2016

See all articles by Adeline Delavande

Adeline Delavande

New University of Lisbon - Faculdade de Economia

Xavier Giné

World Bank - Development Research Group (DECRG)

David J. McKenzie

World Bank - Development Research Group (DECRG); IZA Institute of Labor Economics

Date Written: January 1, 2009

Abstract

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.

Keywords: Economic Theory & Research, Statistical & Mathematical Sciences, Debt Markets, Information Security & Privacy

Suggested Citation

Delavande, Adeline and Gine, Xavier and McKenzie, David John, Measuring Subjective Expectations in Developing Countries: A Critical Review and New Evidence (January 1, 2009). World Bank Policy Research Working Paper Series, Vol. , pp. -, 2009. Available at SSRN: https://ssrn.com/abstract=1344710

Adeline Delavande (Contact Author)

New University of Lisbon - Faculdade de Economia ( email )

Campus de Campolide
Lisboa, 1099-032
Portugal
+35 1 21 380 16 00 (Phone)
+35 1 21 387 09 33 (Fax)

HOME PAGE: http://docentes.fe.unl.pt/~adeline/page2.html

Xavier Gine

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

HOME PAGE: https://sites.google.com/site/decrgxaviergine/

David John McKenzie

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

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