Demographics expectations

The idea of rational expectations has been thirty years is located in the heart of modern economic theory. However, microeconomic studies increasingly demonstrate against the rationality of market players. In particular, the irrationality of a well-illustrated by the differences of inflationary expectations of men and women.

Single-single differ

Federal Reserve Bank of Cleveland (USA) in conjunction with the University of Ohio has long been engaged in the study of inflationary expectations of Americans, based on consumer reviews. And obtain interesting results - it turns out, the assessment of future inflation, much depends on the demographic characteristics of respondents. Personal income, education, age, race and gender significantly correlated with the inflationary expectations and the subjective assessment of the current inflation rate.

Table 1 shows the annual inflation expectations and estimates based on demographic characteristics. The first thing that stands out in the data - a significant disparity in estimates of future inflation, the different groups of people. Respondents with the lowest incomes (less than 20% of total revenue) doubled biased assessment, compared with having the highest income. Young people between 18 and 25 years old, give higher predictions. High inflation expectations is also in the following groups: single (unmarried) that do not belong to the white race, not having higher education, as well as women.

Thus, inflation expectations too high in the poorer and less empowered groups. Part of the difference in estimates of future inflation may be determined by different dynamics of prices of goods consumed. Single, poor and poorly buy goods categories other than those that have become family, wealthy and highly educated. Differential inflationary expectations also spoke about the different behavior of consumers, depending on demographic characteristics.

For example, if a group of people with lower incomes imply a higher growth of prices in the future than the «rich» group, that means they expect a lower real return on savings. Accordingly, «poor» prefer to opt for current consumption at the expense of savings. The offset in expectations explains why the «poor» save disproportionately less than their more affluent counterparts, low inflationary expectations.

Women tend to exaggerate expectations

In a random statistical sample of households (total over 20 thousand respondents) men on average have higher levels of education and earnings. This is certainly reflected in the differences in the inflation expectations of men and women. However, even when comparing the same demographic characteristics of groups are differences in expectations. For example, women tend to overstate inflation expectations by about 2%.

Table 2 provides summary statistics of the annual inflationary expectations of men and women in the United States during 1998-2001. We see that, regardless of income level, inflation expectations of women are consistently higher.

The traditional explanation for inflated expectations of women is that they frequently visited stores, shop, and therefore more aware of the price situation. However, this assumption denies the statistics of single men who offer themselves.

As in the case of married couples, unmarried women have higher expectations compared with singles. Perhaps women's expectations too high at the expense of food, because they are busy preparing food. Study of expectations for the same goods - food, clothing and gasoline - all showed the same high expectations for women.

A similar situation exists in other countries. In particular, the results of consumer surveys in Sweden, women's expectations higher than men's by an average of 1.7% - regardless of age, income, number of children and place of residence.

The great mystery

How can explain this mystery of the discrepancies in expectations? Perhaps, both sexes are not equally aware of the total price. To the question «Have you ever heard anything about the consumer price index?» Responded positively 75% of men and 61% of women. Those who heard about the index, were able to accurately estimate inflation over the past twelve months. But even among women who know about the consumer price index, prevailed over-assessment of current inflation. Thus, none of the assumptions about the source of differences in expectations is not correct.

The mystery of female irrationality is still in force. Perhaps the key to understanding the difference lies in the greater susceptibility of women to the risks and their propensity for stable social and economic environment. And maybe - in the eternal mystery woman ...