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Policy Uncertainty and Information Flows: Evidence from Pension Reform Expectations

Author

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  • Francesconi, Marco
  • Ciani, Emanuele
  • ,
  • Etheridge, Ben
Abstract
Subjective expectations about future policy play an important role in individuals’ welfare. We examine how workers’ expectations about pension reform vary with proximity to reforms, information cost, and aggregate information acquisition. We construct a new pan-European dataset of reform implementations and government announcements, and combine it with individual-level representative survey data on expectations about future reforms and country-level data on online search. We ï¬ nd: (1) Expectations are revised upward by about 10 percentage points in the year leading up to a reform, from a median of 50%, regardless of whether the reform is announced; (2) Aggregate online search increases after announcements, when the cost of information is lower; (3) Reform announcements and online information gathering are substitutes in the formation of expectations; (4) Expectations do not converge as a result of announcements or implementations; (5) The effect of information on expectations varies substantially across workers and systematically with observed characteristics that proxy cognitive ability and information value. These ï¬ ndings, interpreted using a model of rational inattention, reveal substantial informational rigidities, with welfare costs that run into trillions of Euros.

Suggested Citation

  • Francesconi, Marco & Ciani, Emanuele & , & Etheridge, Ben, 2019. "Policy Uncertainty and Information Flows: Evidence from Pension Reform Expectations," CEPR Discussion Papers 13988, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:13988
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    3. Heiner Mikosch & Christopher Roth & Samad Sarferaz & Johannes Wohlfart, 2024. "Uncertainty and Information Acquisition: Evidence from Firms and Households," American Economic Journal: Macroeconomics, American Economic Association, vol. 16(2), pages 375-405, April.
    4. Tullio Jappelli & Immacolata Marino & Mario Padula, 2021. "Social Security Uncertainty and Demand for Retirement Saving," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 67(4), pages 810-834, December.
    5. Kanabar, Ricky & Nivalainen, Satu & Järnefelt, Noora, 2024. "‘Relabelling’ of individual early retirement pension in Finland: Application and behavioural responses using Finnish register data," Journal of Economic Behavior & Organization, Elsevier, vol. 224(C), pages 20-38.
    6. Etgeton, Stefan & Fischer, Björn & Ye, Han, 2023. "The effect of increasing retirement age on households’ savings and consumption expenditure," Journal of Public Economics, Elsevier, vol. 221(C).
    7. Soeren Leth-Petersen & Andrew Caplin & Eungik Lee & Johan Saeverud, 2022. "Communicating Social Security Reform," CEBI working paper series 22-19, University of Copenhagen. Department of Economics. The Center for Economic Behavior and Inequality (CEBI).
    8. Kanabar, Ricky & Nivalainen, Satu & Järnefelt, Noora, 2023. "‘Relabelling’ of individual retirement pension in Finland: application and behavioural responses using Finnish register data," ISER Working Paper Series 2023-05, Institute for Social and Economic Research.
    9. Kalwij, Adriaan & Kanabar, Ricky, 2022. "State Pension eligibility age and retirement behaviour: evidence from the United Kingdom Household Longitudinal Study," ISER Working Paper Series 2022-05, Institute for Social and Economic Research.

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    More about this item

    Keywords

    Expectations; Retirement; Pension reform uncertainty; Reform announcement; Online search; Rational inattention;
    All these keywords.

    JEL classification:

    • C8 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination

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