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Subjective Expectations and Income Processes in Rural India
Author(s) -
Attanasio Orazio,
Augsburg Britta
Publication year - 2016
Publication title -
economica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.532
H-Index - 65
eISSN - 1468-0335
pISSN - 0013-0427
DOI - 10.1111/ecca.12190
Subject(s) - economics , income distribution , econometrics , distribution (mathematics) , parametric statistics , survey data collection , process (computing) , household income , demographic economics , inequality , statistics , computer science , geography , mathematics , mathematical analysis , archaeology , operating system
This paper uses unique primary data on directly elicited individual subjective expectations to analyse and characterize the process that generates the income of poor, rural Indian households. We validate and use responses to subjective expectations questions and a parametric assumption to fit a household‐specific probability distribution for future income. Combining computed moments from this distribution with data for actual current income, we specify and estimate a dynamic model of household income. We find that our households face a very persistent income process. Our paper is one of the first that uses subjective expectations data to model income processes.