Household income expectations: The role of unexpected income changes and aggregate conditions

Bucciol, Alessand o; Easaw, Joshy Z.; T ucchi, Se ena
Wo king Pape
Household income expec a ions: The ole o unexpec ed
income changes and agg ega e condi ions
MUNI ECON Wo king Pape , No. 2025-04
P o ided in Coope a ion wi h:
Masa yk Uni e si y, Facul y o Economics and Adminis a ion
Sugges ed Ci a ion: Bucciol, Alessand o; Easaw, Joshy Z.; T ucchi, Se ena (2025) : Household income
expec a ions: The ole o unexpec ed income changes and agg ega e condi ions, MUNI ECON
Wo king Pape , No. 2025-04, Masa yk Uni e si y, Facul y o Economics and Adminis a ion, B no,
h ps://doi.o g/10.5817/WP_MUNI_ECON_2025-04
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n. 2025-04
ISSN 2571-130X
DOI: 10.5817/WP_MUNI_ECON_2025-04
Published in Jou nal o Economic Beha io & O ganiza ion, 2025 (A icle)
Household Income Expec a ions:
The Role o Unexpec ed Income
Changes and Agg ega e Condi ions
Alessand o Bucciol / Uni e si y o Ve ona, Depa men o Economics
Joshy Easaw / Ca di Uni e si y - Ca di Business School
Se ena T ucchi / Ca di Uni e si y - Ca di Business School, Ne spa and Masa yk Uni e si y
Household Income Expec a ions: The
Role o Unexpec ed Income Changes
and Agg ega e Condi ions
Abs ac
We analyse how unexpec ed income changes and agg ega e condi ions in luence income expec a ions, hei unce ain y, and expec a ion e o s.
We use a uniquely ich longi udinal Du ch su ey collec ing de ailed in o ma ion on he dis ibu ion o household income expec a ions. Ou esul s
show ha unexpec ed income changes, much mo e han agg ega e condi ions, induce a e ision in income expec a ions ac oss he en i e spec um
o he expec ed income dis ibu ion, consis en wi h ex apola i e beha iou . We also documen ha unexpec ed income changes inc ease he
unce ain y abou u u e income. Ou esul s p o ide some e idence o o e - eac ion, pa icula ly o nega i e unexpec ed income changes and
among high-income indi iduals. These e ec s di e based on an indi idual’s posi ion in he income dis ibu ion, which may be a ibu ed o
di e ences in income dynamics, ole o insu ance mechanisms, and a ying le els o awa eness abou how unexpec ed income changes and
agg ega e condi ions impac household inances.
Masa yk Uni e si y
Facul y o Economics and Adminis a ion
Au ho s:
Alessand o Bucciol / Uni e si y o Ve ona, Depa men o Economics
Joshy Easaw / Ca di Uni e si y - Ca di Business School
Se ena T ucchi (ORCID: 0000-0002-1932-7201) / Ca di Uni e si y - Ca di Business School, Ne spa and Masa yk Uni e si y
Con ac : [email p o ec ed]
C ea ion da e: 2025-05
Re ision da e: 2025-06
Keywo ds: Income expec a ions, Expec a ion unce ain y, Expec a ion e o , unexpec ed income changes, Agg ega e condi ions
JEL classi ica ion: D84, G50
Ci a ion:
Bucciol, A., Easaw, J., T ucchi, S. (2025). Household Income Expec a ions: The Role o Unexpec ed
Income Changes and Agg ega e Condi ions. MUNI ECON Wo king Pape n. 2025-04. B no: Masa yk
Uni e si y. h ps://doi.o g/10.5817/WP_MUNI_ECON_2025-04
(h ps://c ea i ecommons.o g/licenses/by/4.0/)
Licensing o he inal ex published in he jou nal is in no way condi ional on his wo king pape licence.
MUNI ECON Wo king Pape n. 2025-04
ISSN 2571-130X
Household Income Expec a ions:
The Role o Unexpec ed Income Changes
and Agg ega e Condi ions ∗
Alessand o Bucciol, Joshy Easaw, Se ena T ucchi
May 8, 2025
Abs ac
We analyse how unexpec ed income changes and agg ega e condi ions in luence in-
come expec a ions, hei unce ain y, and expec a ion e o s. We use a uniquely
ich longi udinal Du ch su ey collec ing de ailed in o ma ion on he dis ibu ion o
household income expec a ions. Ou esul s show ha unexpec ed income changes,
much mo e han agg ega e condi ions, induce a e ision in income expec a ions
ac oss he en i e spec um o he expec ed income dis ibu ion, consis en wi h
ex apola i e beha iou . We also documen ha unexpec ed income changes in-
c ease he unce ain y abou u u e income. Ou esul s p o ide some e idence o
o e - eac ion, pa icula ly o nega i e unexpec ed income changes and among high-
income indi iduals. These e ec s di e based on an indi idual’s posi ion in he in-
come dis ibu ion, which may be a ibu ed o di e ences in income dynamics, ole
o insu ance mechanisms, and a ying le els o awa eness abou how unexpec ed
income changes and agg ega e condi ions impac household inances.
Keywo ds: Income expec a ions; Expec a ion unce ain y; Expec a ion e o ; un-
expec ed income changes; Agg ega e condi ions.
JEL Classi ica ion: D84, G50.
∗We hank Tommaso Reggiani, he pa icipan s o he 2024 Household Finance Wo kshop in Tu in,
he 2023 She ield Household Finance Wo kshop, he ICEEE 2023 con e ence in Caglia i, he 2021
Anglo-F ench-I alian Mac o Wo kshop in Venice, and semina a Ca di Uni e si y o use ul commen s.
The usual disclaime s apply. Co esponding au ho : Se ena T ucchi, Ca di Uni e si y - Ca di Busi-
ness School, Ne spa and Masa yk Uni e si y; add ess: Abe conway Building, Colum Road, Ca di ,
CF10 3EU (UK); email add ess: [email p o ec ed]. Alessand o Bucciol: Uni e si y o Ve ona,
Depa men o Economics; add ess: ia Can a ane 24, 37129 Ve ona (I aly); email add ess: alessan-
[email p o ec ed]. Joshy Easaw: Ca di Uni e si y - Ca di Business School; add ess: Abe conway
Building, Colum Road, Ca di , CF10 3EU (UK); email add ess: easa[email p o ec ed].
1. In oduc ion
Household expec a ions abou u u e income and i s unce ain y a e key ac o s in eco-
nomic decision making. Li e cycle models o consump ion beha iou p edic ha highe
expec ed income leads o inc eased consump ion, while g ea e unce ain y encou ages
p ecau iona y sa ings and educes cu en consump ion (Coibion e al.,2024;Jappelli
and Pis a e i,2017). This, in u n, in luences economic beha iou in o he a eas such
as po olio alloca ion (Fage eng e al.,2018), labou supply (Rossi and T ucchi,2016)
and human capi al (Pa naik e al.,2022). Expec a ions and consump ion dynamics ha e
b oade mac oeconomic implica ions, in luencing he e ec i eness and consequences o
iscal and mone a y policy in e en ions and shaping business cycle luc ua ions ( ecen
examples a e Bo dalo e al.,2022;D’Acun o e al.,2024).
Despi e he c ucial ole o households’ income expec a ions, empi ical e idence on
hei de e minan s is a e, possibly due o he limi ed a ailabili y o su eys collec ing
p ecise in o ma ion on expec a ions o e ex ended pe iods. This s udy p o ides new
e idence on he p ocess o expec a ion o ma ion, ocusing on how se e al aspec s o
income expec a ions – he expec ed alue o household income, i s dispe sion and he
expec a ion e o – espond o mac oeconomic condi ions and unexpec ed changes in
household income. Mo eo e , we explo e how he esponse o income expec a ions a ies
ac oss he income dis ibu ion. This allows us o highligh po en ial he e ogenei y in ou
esul s, which may a ise om di e ences in income p ocesses o he ole o insu ance
mechanisms, such as unemploymen bene i s. In addi ion, we can iden i y who is mos
exposed o he wel a e consequences o expec a ion e o s.
The esponse o income expec a ions o unexpec ed income changes depends on he
deg ee o pe sis ence o income o e ime. Fu u e income is no a ec ed by ansi o y
income shocks, while i e lec s pe manen o pe sis en income changes. Howe e , indi-
iduals may ha e dis o ed expec a ions abou he pe sis ence o hei income. In his
case, income expec a ions may o e - eac o unexpec ed income changes, esul ing in an
expec a ion e o (Masseno and Pe inicchi,2019;Cocco e al.,2022;Rozsypal and Schla -
mann,2023;D’Acun o e al.,2024). A e an imp o emen in hei inancial si ua ion,
indi iduals could o e es ima e u u e income, displaying o e ex apola i e expec a ions
based on ecen expe ience. Acco ding o he model o diagnos ic expec a ions (Gennaioli
and Shlei e ,2010;Bo dalo e al.,2018,2019), expec a ions espond o he news by o e -
weigh ing u u e ou comes ha become mo e likely in ligh o he cu en news. This
leads o an o e es ima ion o he likelihood o posi i e u u e scena ios ollowing a o -
able news and a pessimis ic bias in esponse o nega i e news. Ou s udy in es iga es he
ele ance o diagnos ic expec a ions in he con ex o household income expec a ions. The
2

e ec o agg ega e condi ions on income expec a ions e lec s he indi idual assessmen o
hese condi ions, he awa eness o hei impac on household inancial condi ions, and he
co ela ion o household income wi h he mac oeconomy and he business cycle. These
ela ionships may a y ac oss he income dis ibu ion and can be in luenced by p i a e o
public insu ance mechanisms.
We use a uniquely ich da ase , he DNB Household Su ey (DHS), collec ing de-
ailed da a on household income expec a ions and ealiza ions o a longi udinal sample
o Du ch indi iduals. This enables us o p ecisely measu e he magni ude o expe ienced
unexpec ed income changes, de ined as he de ia ion be ween ac ual household income
and p io expec a ions. This ep esen s a con ibu ion o he li e a u e ha has la gely
examined he e ec s o income changes wi hou dis inguishing be ween an icipa ed and
unexpec ed changes. We in eg a e his da ase wi h agg ega e indica o s on he unem-
ploymen a e and economic policy unce ain y o cap u e agg ega e condi ions.
A unique ea u e o ou empi ical analysis is he a ailabili y o p ecise measu es ha
cap u e he ull dis ibu ion o income expec a ions. Unlike p e ious li e a u e (B own
and Taylo ,2006;Masseno and Pe inicchi,2019;Cocco e al.,2022), we a e able o
quan i y he magni ude o e ision o income expec a ions and no only he expec ed di-
ec ion o he income change (imp o emen o de e io a ion).1Fu he mo e, by analysing
he lowe and uppe bounds o expec ed income, we can also de ec po en ial changes in
he dis ibu ion o income expec a ions. We examine whe he an inc ease (o dec ease)
in he expec ed alue o income esul s om a pa allel shi in he dis ibu ion, a ec ing
bo h he uppe and lowe bounds equally, o i i is d i en by a ela i ely la ge change
in ei he he le o igh ail o he dis ibu ion.
Pe cei ed income unce ain y is measu ed using indica o s ha cap u e he dispe sion
o indi idual income expec a ions. This s udy is one o he i s o explo e he de e -
minan s o pe cei ed income unce ain y o indi iduals.2The longi udinal s uc u e o
he da ase also allows o compa e ex-pos income ealiza ion wi h hei expec a ions o
p ecisely measu e he expec a ion e o . This compa ison helps de e mine whe he he
esponse o income expec a ions e lec s ac ual changes in indi idual ci cums ances o
whe he i esul s om an o e - eac ion o unde - eac ion o hose changes.
Ou indings indica e ha unexpec ed changes in household income ha e a signi ican
and ele an impac on expec a ions, while agg ega e condi ions play a mino and mos ly
1The only s udy measu ing he de ia ion be ween income expec a ions and ealiza ions is he wo king
pape by D’Acun o e al. (2024), which ocuses on Chinese households in he pos -Co id-19 pe iod.
2A no able a emp is Cocco e al. (2022), hough hei analysis is cons ained by da a limi a ions,
as i only cap u es he di ec ion o expec ed income changes. Simila ly, D’Acun o e al. (2024) examine
he link be ween income shocks and unce ain y, bu hei s udy ocuses speci ically on he pos -Co id-19
pe iod in China and does no accoun o agg ega e condi ions.
3
insigni ican ole. On a e age, bo h posi i e and nega i e unexpec ed changes in house-
hold income, pa icula ly ela i ely la ge ones, p omp a e ision in income expec a ions.
Indi iduals expe iencing an unexpec ed posi i e income change e ise hei expec a ions
upwa d, while hey e ise income expec a ions downwa ds when hi by unexpec ed nega-
i e income changes. A ound 20% o he unexpec ed income change a e pe cei ed as pe -
sis en : a 10% inc ease in he posi i e (nega i e) unexpec ed income changes de e mine
an upwa d (downwa d) e ision in income by 2% (2.5%). We also de ec he e ogenei y
ac oss he income dis ibu ion, wi h unexpec ed posi i e income changes being mo e el-
e an a he bo om o he dis ibu ion and nega i e ones a he op. Pe cei ed income
unce ain y inc eases wi h unexpec ed income changes among bo om- and middle-income
ea ne s. In con as , o high-income indi iduals, pe cei ed unce ain y sligh ly inc eases
wi h ad e se agg ega e condi ions. O e all, his he e ogenei y may a ise om di e ences
in income p ocesses ac oss he dis ibu ion, he a ying ele ance o insu ance mecha-
nisms, o di e en le els o awa eness ega ding how unexpec ed income changes and
agg ega e condi ions impac household inancial condi ions.
Unde s anding whe he expec a ions e ision e lec s an o e - eac ion o unexpec ed
income changes and agg ega e condi ions has ele an implica ions o indi idual wel a e
and mac oeconomic ou comes. Acco ding o he li e-cycle model, an unexpec ed income
change de e mines a e ision in op imal consump ion. I unexpec ed income changes
igge an o e - eac ion in income expec a ions, consume s may de ia e om hei op-
imal consump ion pa h—spending less (o mo e) han op imal in esponse o nega i e
(o posi i e) income shocks. This has a de imen al e ec on he abili y o smoo h con-
sump ion and may ampli y he con ac ion in agg ega e consump ion du ing ecessions.
By compa ing income expec a ions and hei u u e ealiza ions we ind ha e ision in
expec a ions is pa ly due o an o e - eac ion o unexpec ed income changes, especially
o unexpec ed nega i e income changes and among high-income indi iduals. Top-income
indi iduals a e cha ac e ized by a lowe ma ginal p opensi y o consume and la ge bu e
s ocks. The e o e, o e - eac ion o unexpec ed income changes is mos ly concen a ed in
he g oup whe e he consequences o sub-op imal consump ion pa h a e less se e e.
This s udy con ibu es o he li e a u e ha in es iga es he ole o indi idual expe-
ience (Malmendie and Nagel,2011,2016;Masseno and Pe inicchi,2019;Kuchle and
Za a ,2019;Cocco e al.,2022;Rozsypal and Schla mann,2023;D’Acun o e al.,2024)
and agg ega e condi ions (Bloom,2009;Malmendie and Nagel,2011;Coibion e al.,2021;
Easaw and G imme,2024) in shaping indi idual beha iou and expec a ions. Mos o
hese s udies ocus ei he on indi idual beha iou and a i udes o on expec a ions abou
mac oeconomic ac o s. We con ibu e o his li e a u e by e alua ing how he dis ibu-
ion o expec a ions abou household income and i s unce ain y espond o unexpec ed
4
income changes and agg ega e condi ions.
The emainde o he pape is o ganized as ollows. Sec ion 2 e iews he ela ed
li e a u e; Sec ion 3illus a es he da a; Sec ion 4discusses he empi ical me hods and
esul s; inally, Sec ion 5concludes.
2. Theo e ical amewo k and li e a u e e iew
The gene al heo e ical amewo k unde pinning ou analysis is based on he cogni i e
p ocesses ha d i e expec a ion o ma ion. Gennaioli and Shlei e (2010) and Bo dalo
e al. (2018,2019) de elop a model o diagnos ic expec a ions, in which expec a ions
o e weigh u u e ou comes ha become mo e likely in ligh o he cu en news. The e-
o e, a ou able news leads indi iduals o o e es ima e he p obabili y o posi i e u u e
ou comes, while nega i e e en s cause hem o o e es ima e he likelihood o nega i e
u u e ou comes. In ou speci ic con ex , his implies ha he e is a link be ween cu en
unexpec ed income changes and he e ision o expec a ions and he expec a ion e o .
Diagnos ic expec a ions embed ex apola ion. Howe e , unlike mechanical ex apola ion
based on adap i e expec a ions, diagnos ic expec a ions a e o wa d-looking. Dis o ions
a ise when news p o ides in o ma i e insigh s in o u u e e en s.3
A e ision in income expec a ion ollowing an unexpec ed income change may be
d i en by uly pe sis en shocks. Howe e , i unexpec ed income changes a e signi ican ly
co ela ed wi h expec a ion e o s, his can indica e dis o ed expec a ions. Masseno and
Pe inicchi (2019) illus a e his aspec , building on he concep s o ex apola ion and
o e -ex apola ion. I indi iduals conside unexpec ed income changes o be pe sis en
and ex apola e hei ecen expe ience, he ela ionship be ween cu en and expec ed
income g ow h is posi i e. In con as , i hey expec ansi o y unexpec ed income
changes and mean e e sion, his ela ionship is nega i e. Indi iduals o e -ex apola e
when hey conside hei income g ow h o be mo e pe sis en han i ac ually is, hus
gene a ing an expec a ion e o . Indi iduals o e es ima e hei u u e income ollowing
an unexpec ed posi i e income change, and unde es ima e i ollowing a nega i e one.
Simila ly, Rozsypal and Schla mann (2023) illus a e an expec a ion o ma ion ule
based on he o e -pe sis ence bias, whe e indi iduals o e es ima e he pe sis ence o hei
income p ocess.4The main di e ence be ween Rozsypal and Schla mann (2023) and
3Ano he impo an ac o in luencing how indi iduals o m hei expec a ions is cogni i e unce ain y.
Enke and G aebe (2023) show ha indi iduals who epo highe le els o (subjec i e) cogni i e unce -
ain y end o comp ess hei p obabilis ic dis ibu ions. Consequen ly, hey o e es ima e he p obabili y
o unlikely e en s while unde es ima ing he p obabili y o likely ones.
4Rozsypal and Schla mann (2023) model expec a ion o ma ion in he con ex o a s anda d income
5
he diagnos ic expec a ions app oach o Gennaioli and Shlei e (2010) and Bo dalo e al.
(2018,2019) is ha in he la e he expec a ion e o depends on he la es news, whe eas
in Rozsypal and Schla mann (2023) i depends on he his o y o indi idual unexpec ed
income changes. S udying he esponse o income expec a ions and expec a ion e o o
new in o ma ion, speci ically agg ega e condi ions and unexpec ed income changes, his
pape con ibu es o his li e a u e by empi ically examining he ele ance o diagnos ic
expec a ions and i s he e ogenei y ac oss he income dis ibu ion. A c i ical aspec o
ou analysis is he inclusion o a measu e o unexpec ed income changes, a he han jus
income changes. This is c ucial as unexpec ed income changes ep esen an upda e o
an indi idual’s in o ma ion se , p o iding a mo e nuanced unde s anding o he cogni i e
p ocesses in ol ed.
By analysing he e ec o unexpec ed changes in household income and agg ega e
condi ions on indi idual income expec a ions, his pape builds on he empi ical li e a u e
s udying he e ec o expe iences on economic ou comes. These s udies conside ei he he
ole o mac oeconomic condi ions expe ienced du ing he li e-cycle and in he ecen pas
(Malmendie and Nagel,2016;Kuchle and Za a ,2019) o he ole o pe sonal expe ience
and indi idual e en s (Bucciol and Za i,2015;Bucciol and Miniaci,2018;Cocco e al.,
2022;Rozsypal and Schla mann,2023;D’Acun o e al.,2024).
The i s g oup o s udies examine whe he people li ing h ough di e en mac oe-
conomic his o ies di e in hei expec a ions, a i udes and beha iou . Risk a i udes,
expec a ions and po olio composi ion a e in luenced by expe iences o s ock ma ke e-
u ns and economic dep ession (Malmendie and Nagel,2011;Guiso e al.,2018;Angelini
and Fe a i,2021;Heiss e al.,2022) and high in la ion (Malmendie and Nagel,2016;
Malmendie and Bo sch,2020;Malmendie and Wellsjo,2024). These s udies p o ide
e idence ha agg ega e expe ience a ec s economic expec a ions, wi h a p ima y ocus
on expec a ions o mac oeconomic a iables, such as in la ion o s ock ma ke ends. We
add o his ecen li e a u e by linking agg ega e expe ience wi h expec a ions o indi-
idual ou comes, namely u u e household income. In doing his, we also ocus on Ro h
and Wohl a (2020), who show how indi iduals’ mac oeconomic expec a ions a ec hei
pe sonal economic p ospec s.
Pe sonal e en s ha e also been shown o ha e a ele an impac on indi idual a i-
udes, beha iou and expec a ions. Fo example, pe sonal expe ience wi h po olio isks
and e u ns (Kau sia and Knup e ,2008;Bucciol and Miniaci,2018), li e-cou se nega i e
e en s (Bucciol and Za i,2015), and a na u al disas e (Hanaoka e al.,2018) in luence
inancial isk p opensi y and isk- aking. Ou app oach is ela ed o hese s udies in ha
p ocess wi h pe manen and ansi o y unexpec ed income changes, while Masseno and Pe inicchi (2019)
do no explici ly model he income p ocess bu hey assume an AR(1) p ocess o income g ow h.
6
Fo each dependen a iable, s anda d s a is ical es s ind he ixed-e ec model o
desc ibe he da a be e han he pooled model (wi hou indi idual ixed e ec s) and
andom-e ec model (whe e indi idual e ec s a e abso bed in he e o e m); esul s
a e a ailable upon eques . In wha ollows, we adop he con en ion o commen on
coe icien s signi ican a leas a he 5% le el.
4.1. Benchma k esul s
Table 2ou lines he esul s o he benchma k analysis. In gene al, unexpec ed changes
in household income play a mo e ele an ole compa ed o agg ega e condi ions, which
only ma ginally a ec all he measu es o income expec a ions we analyse. Looking a
income expec a ions, esul s in Column 1 show a signi ican e ec o bo h posi i e and
nega i e unexpec ed income changes. Posi i e (nega i e) unexpec ed changes inc ease
(dec ease) expec ed income, consis en wi h ex apola i e beha iou , as in Masseno and
Pe inicchi (2019); D’Acun o e al. (2024) and Cocco e al. (2022). The e ec s a e simila
in magni ude: a 10% unexpec ed income change leads o a e ision o 2% o posi i e
changes and 2.5% o nega i e ones. This sugges s ha indi iduals pe cei e 20–25% o
unexpec ed income changes as pe sis en .
These e isions impac he en i e dis ibu ion o expec a ions, as shown in Columns
2 and 3. Posi i e unexpec ed income changes inc ease bo h he minimum and he max-
imum expec ed income, and nega i e unexpec ed income changes dec ease bo h bounds.
The e ec s o posi i e and nega i e changes a e symme ic, wi h unexpec ed posi i e in-
come change ha ing a g ea e impac on he uppe bound o income expec a ions and
unexpec ed nega i e income changes on he lowe bound.
By widening he sp ead be ween uppe and lowe bounds, bo h posi i e and nega i e
unexpec ed income changes a ec he pe cep ion o income unce ain y (Column 4). A
10% unexpec ed income change leads o an inc ease in pe cei ed unce ain y o 0.5-0.6%.
This esul is in con as o e idence in Cocco e al. (2022), showing an inc ease in ex-
pec a ion dispe sion only ollowing a de e io a ion in inancial condi ions. This di e ence
could be a ibu ed o he explana o y a iables used: we iden i y unexpec ed income
changes, while Cocco e al. (2022) ocus on changes in inancial condi ions, which can be
ei he unexpec ed o an icipa ed. The e ec o unexpec ed income changes on he s an-
da d de ia ion o expec a ions (Column 5) is less signi ican and smalle in magni ude.
Focusing on agg ega e condi ions, unemploymen signi ican ly inc eases unce ain y, bu
i s e ec is small, consis en wi h i ms unce ain y measu es (Easaw and G imme,2024).
Hence, an inc ease o 1 pe cen age poin in he unemploymen a e esul s in an inc ease
in he s anda d de ia ion by 0.2%. On a e age, economic policy unce ain y does no
13

signi ican ly a ec he pe cep ion o income unce ain y.12
We examine expec a ion e o s (Column 6) and hei magni ude (Column 7) o assess
whe he expec a ions e lec ac ual income ealiza ion o i hey o e eac o unexpec ed
income changes, in line wi h o e -ex apola ion (Masseno and Pe inicchi,2019;Cocco
e al.,2022;D’Acun o e al.,2024) and diagnos ic expec a ions (Bo dalo e al.,2018,2019).
Expec a ion e o s, de ined as he di e ence be ween he ex-pos income ealiza ion and
i s expec ed alue in he p e ious pe iod (Exp. e =y +1 −E [y +1]), a e unbiased,
as indica ed by he non-signi ican cons an in Column 6. Unexpec ed income changes
signi ican ly al e expec a ion e o s, wi h unexpec ed nega i e income changes ha ing
mo e han wice he impac o posi i e ones. Speci ically, a 10% inc ease in unexpec ed
posi i e income change educes e o s by 1.6%, while he same inc ease in unexpec ed
nega i e income changes inc ease e o s by 4%.13
The educ ion in he expec a ion e o ollowing an inc ease in he unexpec ed posi i e
income change (Column 6) may depend on ei he an inc ease in o e o ecas ing, namely
an inc ease in he size o he e o when posi i e, o a educ ion in unde o ecas ing,
namely a educ ion in he e o when nega i e. Simila a gumen applies o he e ec o
unexpec ed nega i e income changes. To disen angle hese wo mechanisms, we examine
he absolu e alue o he expec a ion e o (Column 7). The nega i e and s a is ically
signi ican impac o an unexpec ed posi i e income change indica es an a e age educ ion
in i s size, sugges ing ha he p edominan channel is he weakening o unde o ecas ing.
On a e age, unexpec ed nega i e income changes inc ease expec a ion e o s (Column 6),
bu do no signi ican ly a ec he size o he expec a ion e o (Column 7). This indica es
ha unexpec ed nega i e income changes igge bo h mechanisms, wi h some indi iduals
dec easing o e o ecas ing and o he s inc easing unde o ecas ing. These indings pa ly
con i m he ole o o e -ex apola ion and diagnos ic expec a ions in explaining he e-
sponse o income expec a ions o unexpec ed income changes. On a e age, indi iduals
end o educe he size o he expec a ion e o ollowing unexpec ed posi i e income
changes, deno ing imp o ed accu acy and he absence o o e -ex apola ion. Howe e , we
ind e idence o o e -ex apola ion ollowing unexpec ed nega i e income changes, his
inc easing unde o ecas ing. The analysis o he e ogenei y ac oss he income dis ibu ion
illus a ed in Sec ion 4.3 will p o ide u he insigh s in o hese esul s.
TABLE 2 ABOUT HERE
12These indings con i m he esul s epo ed by Piccillo and Poonpakdee (2021). When examining a
simila ime ame, hey ind a s a is ically insigni ican ela ionship be ween economic policy unce ain y
and subjec i e income unce ain y.
13The he e ogenei y in he impac o unexpec ed nega i e income changes on expec a ion e o s is
p ima ily d i en by op-income ea ne s, as shown in Table 3and discussed below.
14
4.2. Sensi i i y and obus ness checks
In he appendices, we check he sensi i i y and obus ness o ou esul s using al e na i e
sample es ic ions and speci ica ions. In Appendix Awe show esul s on al e na i e
samples. We enla ge he sample and include pa ne s and esponden s who epo income
bands o household income. Ou esul s a e also obus o omi ed a iables acco ding
o he Os e (2019) es ; see Appendix B.
In Appendix C, we s udy he obus ness o ou indings o changes in he speci ica ion.
We conside six cases. In Appendix Table C.1 we eplace unexpec ed income changes wi h
an “objec i e” measu e o unexpec ed income changes ob ained ollowing D’Acun o e al.
(2024). The objec i e measu e is ob ained as he esidual om a eg ession o ealized
income on i s lagged alue, plus socio-demog aphic con ols and ime ixed e ec s. The
eg ession is es ima ed sepa a ely o ou g oups de ined acco ding o wo dimensions:
gende (male/ emale) and educa ion (college deg ee/lowe deg ee). We do his because
unexpec ed income changes and subjec i e expec a ion e o s migh be mechanically co -
ela ed due o se ial co ela ion in expec a ion e o s. The es ima ion esul s la gely
con i m ou indings, ein o cing he obus ness o ou analysis. In pa icula , simila o
D’Acun o e al. (2024), we ind an o e - eac ion o income changes.
In Appendix Table C.2 we add o he speci ica ion wo addi ional mac oeconomic
indica o s, namely he in la ion a e (based on he consume p ice index) and qua e ly
GDP (in eal e ms, seasonally adjus ed, and ans o med using he in e se hype bolic
sine). In Appendix Table C.3 we eplace ou mac oeconomic measu es wi h yea dum-
mies o cap u e business cycle e ec s. The es ima ion esul s ein o ce he limi ed ole
o agg ega e economic condi ions while con i ming he signi ican impac o unexpec ed
income changes.
In Appendix Table C.4 we include in he speci ica ion a dummy equal o one o
posi i e unexpec ed income changes and equal o ze o o he wise. In Appendix Table C.5
we add he same dummy as in he p e ious exe cise and dummy a iables o la ge posi i e
and nega i e unexpec ed income changes, alone and in e ac ed wi h he size o income
changes. We de ine “la ge” unexpec ed income changes as changes la ge han he median.
In his way, we in es iga e he he e ogenei y o he e ec o unexpec ed income changes
due o hei size. A g aphical ep esen a ion o he ma ginal e ec o he ou ypes o
unexpec ed income changes on he ou come a iables is shown in Figu e 4. As a gene al
esul , ou indings a e d i en p ima ily by la ge unexpec ed income changes.
In Appendix Table C.6 we include in he speci ica ion he lagged alue o he posi i e
and nega i e unexpec ed income changes. The pu pose is o assess whe he he in o ma-
ion om he mos ecen pe iod is he main d i e o households’ cu en expec a ions.
15
E en i we expe ience a d op in he sample size due o he inclusion o a lagged a i-
able, he es ima ed e ec o unexpec ed income changes emains la gely signi ican . We
ind a signi ican impac o p e ious unexpec ed income changes on he le el o income
expec a ions (including lowe and uppe bounds) and he o ecas e o , while hei e -
ec on pe cei ed unce ain y is no signi ican a s anda d le els. Howe e , he e ec o
lagged unexpec ed income changes is smalle in magni ude, indica ing ha mo e ecen
in o ma ion is mo e impo an . This inding is in line wi h Rozsypal and Schla mann
(2023), which shows ha he en i e his o y o unexpec ed income changes con ibu es o
he o ma ion o expec a ions.
FIGURE 4 ABOUT HERE
4.3. He e ogenei y by income g oup
In his sec ion we in es iga e how baseline esul s a e he e ogeneous be ween income sub-
g oups, iden i ied using a e age household income du ing he obse ed pe iod.14 This may
con ibu e o unde s anding he d i e s behind he esul s in Table 2and gauge hei im-
plica ions. The e may be se e al ac o s con ibu ing o he e ogenei y. Income p ocesses
may a y ac oss income g oups, exhibi ing di e en deg ees o pe sis ence and unce -
ain y, and income o op ea ne s po en ially being highly co ela ed wi h he business
cycle. In addi ion, he a ailabili y and ele ance o public (unemploymen ) and p i a e
(wi hin- amily) insu ance mechanisms agains income luc ua ions can a y h oughou
he income dis ibu ion.15 Finally, due o he posi i e co ela ion be ween income and
educa ion, op-income indi iduals may be be e awa e o cu en mac oeconomic condi-
ions and how hey can a ec household income. This analysis also allows us o examine
he he e ogenei y in he wel a e consequences o expec a ion e isions, pa icula ly expec-
a ion e o s and income unce ain y, which may be mo e se e e o lowe -income g oups
due o limi ed inancial bu e s.
The h ee panels in Table 3ou line he key es ima e esul s o he bo om-, middle-
and op-income g oups, espec i ely, wi h he ull se o es ima ed coe icien s shown in
Appendix D. Fi s , we de ec he e ogenei y in he e ec o unexpec ed income changes
on he expec ed alue o income (Column 1), possibly e lec ing di e en income p o-
cesses o he h ee g oups. App oxima ely 25% o unexpec ed posi i e income changes
a e conside ed pe sis en o he bo om- and middle-income g oups, while op-income
14This measu e ensu es cons an g oups and a oids alloca ing amilies di e en ly in excep ional yea s
wi h la ge unexpec ed income changes. The a e age income in he 3 g oups is 18,000, 32,000 and 53,000
eu os.
15I is wo h no ing ha income e e s o ne household income.
16
indi iduals pe cei e hem as ansi o y (insigni ican coe icien in Panel C). In con as ,
unexpec ed nega i e income changes a e signi ican o all g oups bu a e pe cei ed o be
mo e pe sis en a he op o he dis ibu ion. Fo op-income ea ne s, a 10% inc ease
in unexpec ed nega i e income changes esul ing in a 6.5% inc ease in expec ed income.
We in e p e his he e ogenei y as a ising om di e ences in labou income dynamics,
exposu e o he business cycle, and he ole o sa e y ne s. A signi ican ac ion o high-
income ea ne s, o en in manage ial oles, come om ola ile sou ces, such as business
p o i s and bonuses, which a e ied o business cycle luc ua ions. The e o e, hey may
pe cei e unexpec ed nega i e income changes as mo e pe sis en , an icipa ing a slowe e-
co e y a e down u ns. In addi ion, hei specialized job oles make eemploymen mo e
di icul and inc ease hei exposu e o business cycle luc ua ions. Howe e , Columns 6
and 7 show ha his downwa d e ision in expec a ion is excessi e, indica ing an o e -
eac ion o unexpec ed income d ops in his g oup. In con as , hey iew unexpec ed
income inc eases as empo a y, in eg a ing ola ili y in o hei expec a ions and a oiding
expec a ion e o s.
Fo low- and middle-income indi iduals, unexpec ed posi i e and nega i e income
changes ha e signi ican and compa able e ec s on income expec a ions (Column 1, Panels
A and B), and he magni ude is less han hal ha o he op-income g oup. Expec a ion
e isions in hese g oups e lec highe pe sis ence in hei income p ocess, which p ima ily
ely on wages and, in some cases, go e nmen ans e s. Among low-income esponden s,
unexpec ed nega i e income changes ha e a ela i ely smalle e ec on income expec a-
ions, emphasizing he s abilizing ole o insu ance mechanisms, such as unemploymen
bene i s and ans e s, in mi iga ing he impac o income d ops.
The de e minan s o pe cei ed unce ain y (Columns 4-5) also exhibi he e ogenei y
ac oss he income dis ibu ion. Fi s , unce ain y esponds o unexpec ed income changes
o low- and middle-income indi iduals, whe eas o op ea ne s, i is p ima ily d i en by
agg ega e economic condi ions. Unexpec ed posi i e income changes a e he main d i e s
o pe cei ed income isk o middle-income indi iduals (Panel B). They e ise upwa d
expec a ions abou he u u e income uppe bound bu no o he lowe bound. This
e lec s unce ain y abou he pe sis ence o he income change. Al hough hey an icipa e
he possibili y o highe u u e ea nings, hey do no adjus he lowe bound because o
conce ns abou i s pe manence. As a esul , his inc eases income dispe sion and may
weaken he consump ion esponse o unexpec ed posi i e income changes. A he bo om
o he income dis ibu ion, pe cei ed unce ain y (Column 4, Panel A) inc eases only a e
a nega i e unexpec ed income change. Howe e , he magni ude o his e ec is oughly
one- hi d o ha obse ed among middle-income indi iduals, possibly ela ed o a g ea e
ole o unemploymen bene i s and o he income suppo measu es among his g oup.
17
Agg ega e condi ions signi ican ly a ec he dispe sion o expec a ions only among he
op-income g oup, albei wi h a ela i ely modes magni ude.16 The e ec o agg ega e
condi ions on op-income ea ne s’ expec a ions can be ela ed o wo main ac o s. Fi s ,
high-income ea ne s a e o en in manage ial oles and mo e exposed o he inancial ma -
ke s, which a e mo e a ec ed by business cycles and mac oeconomic luc ua ions. This
is consis en wi h he indings o Ro h and Wohl a (2020), sugges ing ha indi iduals
highly exposed o agg ega e isk a e mo e likely o upda e hei pe sonal expec a ions in
esponse o b oade economic condi ions. Second, he signi ican ole o agg ega e con-
di ions among op-ea ne s may a ise om di e ences in a en i eness and pe cep ion o
mac oeconomic ends, along wi h he awa eness o hei impac on household economic
condi ions. This, in u n, shapes hei expec a ions. This p ocess un olds in h ee key
s ages o expec a ion o ma ion (Fus e e al.,2022): in o ma ion selec ion, in o ma ion
acquisi ion, and in o ma ion p ocessing. As shown in Appendix Table D.1, income is pos-
i i ely co ela ed wi h educa ion, inancial li e acy, and he endency o consul inancial
sou ces o decision-making. These ac o s likely lowe he cos o acqui ing and p o-
cessing economic in o ma ion, making high-income ea ne s mo e esponsi e o agg ega e
condi ions.17
Unexpec ed income changes ha e di e en e ec s on expec a ion e o s ac oss he
h ee subg oups. Fo he bo om- and middle-income g oups, he impac o unexpec ed
posi i e and nega i e income changes on expec a ion e o is o simila magni ude (Col-
umn 6). The educ ion in expec a ion e o due o unexpec ed posi i e income changes
is p ima ily d i en by a weakening o unde o ecas ing, as indica ed by he nega i e co-
e icien s in Column 7. In con as , unexpec ed nega i e income changes lead o bo h a
dec ease in o e o ecas ing and an inc ease in unde o ecas ing.18 Among he op-income
g oup, howe e , only unexpec ed nega i e income changes signi ican ly and subs an ially
inc ease expec a ion e o . The p onounced downwa d e ision ac oss he en i e dis i-
bu ion o income expec a ions ollowing a nega i e change sugges s an o e - eac ion in
expec a ions and a shi owa d unde o ecas ing in his g oup, as e lec ed in he posi i e
coe icien s in Columns 6 and 7. In o he wo ds, ou esul s sugges ha op income
esponden s unde o ecas u u e income, esul ing in a la ge es ima ed pe sis ence o in-
come changes. This esul is in line wi h he o e -pe sis ence bias mechanism in Rozsypal
16The e ec o posi i e unexpec ed income changes on he s anda d de ia ion epo ed in Column 5 is
also s a is ically signi ican , albei wi h a e y small magni ude.
17This inding is consis en wi h Easaw and G imme (2024), which highligh s ha op execu i es a e
pa icula ly awa e o agg ega e unce ain y’s impac on i ms, ha is likely ex ends o hei household
income expec a ions as well.
18The mixed e ec o unexpec ed nega i e income changes on o e -ex apola ion is e iden in he
educed es ima ed e ec om Column 6 o Column 7 in Panel A and he s a is ically insigni ican
coe icien in Column 7 in Panel B.
18

and Schla mann (2023) and wi h empi ical indings o o e -ex apola ion o expec a ions
in Cocco e al. (2022); Masseno and Pe inicchi (2019); D’Acun o and Webe (2024).
Unexpec ed posi i e changes, on he o he hand, a e pe cei ed as empo a y and do no
signi ican ly a ec expec a ion e o s. This asymme y may be a ibu ed o speci ic ea-
u es o he income p ocess o op-ea ne s who ely hea ily on a iable income sou ces,
which a e mo e ola ile and co ela e wi h business cycle luc ua ions. This dis inc i e
pa e n among op-income indi iduals accoun s o he g ea e a e age impac o nega-
i e income changes compa ed o posi i e ones, as shown in Table 2. O e all, ou esul s
sugges ha a e an unexpec ed posi i e income change, indi iduals end o ei he no o
e ise hei expec a ions o o imp o e hei accu acy. Howe e , a signi ican numbe o
indi iduals o e eac o unexpec ed nega i e income changes, excessi ely e ising down-
wa d hei expec a ions, pa icula ly a he op o he income dis ibu ion. This sugges s
ha he diagnos ic expec a ion mechanism p oposed by Bo dalo e al. (2018,2019) is
especially ele an o high-income indi iduals.
TABLE 3 ABOUT HERE
5. Conclusions
We s udy how unexpec ed income changes and agg ega e condi ions a ec income expec a-
ions, no ably hei unce ain y and expec a ion e o s. We ind ha unexpec ed changes
in household income ha e a signi ican and ele an impac on expec a ions e ision and
hei unce ain y, while agg ega e condi ions play a mino and mos ly insigni ican ole.
Resul s a e he e ogeneous ac oss he income dis ibu ion, possibly due o di e ences in
income p ocesses, he a ying ele ance o insu ance mechanisms, o di e en le els o
awa eness ega ding how unexpec ed income changes and agg ega e condi ions impac
household inancial condi ions. By compa ing income expec a ions and hei u u e e-
aliza ions we ind ha e ision in expec a ions is pa ly due o an o e - eac ion o un-
expec ed income changes, especially o unexpec ed nega i e income changes and among
high-income indi iduals.
Ou indings help o unde s and household expec a ions and, consequen ly, hei be-
ha io in esponse o unexpec ed income changes and h oughou he business cycle.
This, in u n, in o ms he de elopmen o policy in e en ions, including iscal and labou
ma ke policies.
F om a wel a e pe spec i e, indi iduals e ise hei income expec a ions downwa d a -
e an unexpec ed nega i e income change and upwa d ollowing an unexpec ed posi i e
19
income change, wi h a ound 20% o unexpec ed income changes pe cei ed as pe sis en .
Acco ding o he pe manen income hypo hesis, his induces a change in consump ion.
I hese unexpec ed income changes a e accompanied by an o e - eac ion o income ex-
pec a ions, consume s make a sub-op imal consump ion, which is lowe (highe ) han i s
op imum a e nega i e (posi i e) unexpec ed income changes. In his line, D’Acun o
e al. (2024) epo ha household spending and deb decisions e lec (inaccu a e) sub-
jec i e income expec a ions. Ou esul s show ha o e - eac ion o unexpec ed posi i e
income changes is limi ed and ha he ele ance o unde o ecas s ollowing unexpec ed
nega i e income changes inc eases wi h income. The wel a e consequences o subop imal
consump ion plans due o expec a ion e o s a e less se e e o he op income g oup,
cha ac e ized by lowe ma ginal u ili y o consump ion and possibly la ge bu e s ocks.
Thus, he ex-an e consump ion pa e n is close o he op imal one in he g oup whe e
consequences o sub-op imali y a e mos p onounced.
P uden indi iduals also inc ease hei p ecau iona y sa ings when income unce ain y
inc eases, he eby educing cu en consump ion. Consump ion con ac ion ollowing an
unexpec ed nega i e income change is mo e se e e i i is accompanied by an upwa d
e ision in income unce ain y. We show e idence o his channel, pa icula ly among low
income esponden s. This may ampli y he consump ion con ac ion a e an unexpec ed
income educ ion in his g oup. Unexpec ed posi i e income changes a e associa ed wi h
an inc ease in income dispe sion, which weakens he e ec o unexpec ed posi i e income
changes on consump ion g ow h.
E idence o limi ed esponsi eness o household income expec a ions o agg ega e
condi ions, beyond hei indi idual ci cums ances, aises conce ns abou he accu a e
assessmen o u u e scena ios ela ed o he business cycle. Failu e o adequa ely conside
hese ac o s can ha e de imen al consequences o consume s, pa icula ly in ecession
pe iods.
Ou empi ical s udy has some limi a ions, which p esen s oppo uni ies o u u e e-
sea ch. Fi s , i would be in e es ing o di ec ly assess how consump ion and sa ings
espond o income expec a ions, unce ain y and expec a ion e o . Un o una ely, he
DHS da ase eco ds sa ings amoun s in bands, making his analysis challenging wi h-
ou access o a mo e de ailed da ase . Mo eo e , we a ibu e he he e ogenei y ac oss
he income dis ibu ion mainly o di e ences in he ea ning p ocess. Howe e , income,
educa ion, inancial knowledge and po olio composi ion a e in e wined. Consequen ly,
isola ing he speci ic ole o each ac o wa an s u he in es iga ion. Finally, al hough
we obse e he co ela ion be ween unexpec ed income changes and expec a ions, we do
no explo e he speci ic channels h ough which his connec ion ope a es. Fo exam-
ple, psychological cha ac e is ics such as pe sonali y ai s, o pas expe iences such as
20
encoun e ing ecessions du ing one’s li e cycle, could in luence how indi iduals pe cei e
unexpec ed income changes. The analysis o unde lying mechanisms is le o u u e
esea ch.
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22
Figu e 3: Time pa e n o unemploymen a e and mac oeconomic unce ain y
No es: The g aph shows he (3-mon hs a e age) unemploymen a e and he Policy Unce ain y Index (mon hly alues,
ihs). Fo he la e , i plo s bo h he o iginal da a poin s (do ed line) and hose ob ained by applying a smoo hness
il e (local OLS eg ession implemen ed h ough he lowess command in S a a; solid line).
29

Figu e 4: Ma ginal e ec s o small and la ge unexpec ed income changes
No es: Es ima ed coe icien s and 95% s anda d e o s. Comple e es ima e esul s a e epo ed in Appendix Table C.5.
30
A. Appendix: Va iable de ini ion and sensi i i y checks
A.1. Income expec a ions
We de i e income expec a ion ( a iable Exp. y in he analysis) as a weigh ed a e age
using he p obabili ies PRO1,PRO2,PRO3 and PRO4 and he associa ed amoun s. We
o he wise ake he simple a e age be ween LAAG and HOOG in case LAAG and HOOG
di e by less han 5 eu os. We also ocus on he lowe and uppe bounds o income
expec a ion as an ou come o he analysis. They a e, espec i ely, a iables LB and UB
in he analysis.
To u he explo e he ela ionship be ween income expec a ions and job- ela ed ex-
pec a ions, we use addi ional in o ma ion collec ed by he DHS. Responden s, ca ego ized
acco ding o hei employmen s a us, a e asked abou he p obabili y o losing o inding
a job in he nex 12 mon hs. We es ima e condi ional co ela ions h ough OLS eg es-
sions o income on he p obabili y o job loss o job inding while con olling o wo king
s a us and a se o co a ia es. Resul s o wo king and unemployed indi iduals a e g aph-
ically summa ized in Figu e A.1. The pe cei ed p obabili y o job loss is signi ican ly
co ela ed wi h mos ou come a iables, displaying he expec ed sign. The esul s o he
unemployed subg oup a e less p ecise, pa ly due o he smalle sample size. Howe e ,
he uppe bound o expec ed income and income unce ain y a e signi ican ly co ela ed
wi h he likelihood o inding a job. These indings suppo he p ima y ole o labou
income in shaping o al household income expec a ions.
31
Figu e A.1: Co ela ion be ween ou come a iables and job- ela ed expec a ions
No es: Condi ional co ela ion be ween ou come a iables and job- ela ed expec a ions. The g aph plo s OLS es ima ed
coe icien s and 90% le el con idence in e als. The dependen a iables a e he same as in Table 2, and he key
independen a iable is he p obabili y o losing/ inding a job o wo ke s o unemployed, espec i ely. Con ol
a iables a e he same as in Table 2.
A.2. Expec a ion unce ain y
We conside wo main measu es o income unce ain y. The i s is he di e ence be ween
he uppe and lowe bounds o he income expec a ions ( a iable UB-LB in he analysis).
We also c ea e a measu e o s anda d de ia ion by exploi ing he na u e o he da a. The
s anda d de ia ion o expec ed income ( a iable SD exp. in he analysis) is de i ed om
he p obabili ies and he associa ed amoun s in ques ions PRO1-PRO4. The s anda d
de ia ion is o he wise se o ze o i LAAG and HOOG di e by less han 5 eu os.
A.3. Expec a ion e o
We de ine he expec a ion e o ( a iable Exp. e . in he analysis) as he di e ence
be ween he income ealiza ion epo ed in yea +1 and he income expec a ion o yea
+ 1 epo ed in yea . We also conside i s absolu e alue ( a iable Exp. e . (abs)) o
ocus on he magni ude o he expec a ion e o .
The baseline sample includes esponden s who gi e “consis en ” esponses on he p ob-
abili y dis ibu ion o expec ed income, namely hose who a e ei he i) ce ain abou hei
u u e income ( he di e ence be ween uppe and lowe bounds is smalle han 5 eu os) o
ii) epo ing inc easing p obabili ies wi h expec ed income h esholds. Hence, 83.18% o
he esponden s gi e consis en p obabili ies (o a e ce ain abou u u e income). E en i
32
less han 17% o he esponden s epo inconsis en p obabili ies, his may aise conce ns
abou sample selec ion. To add ess his issue, we i s examine he ac o s associa ed wi h
he p obabili y o gi ing a consis en p obabili y dis ibu ion. OLS eg ession esul s a e
epo ed in Table A.1. We only ind a signi ican co ela ion wi h gende and age.
Table A.1: Sample selec ion: P obabili y o gi ing a consis en p obabili y dis ibu ion
(1)
Dep. a . Consis en answe
Age 0.002**
(0.001)
Pa ne in he hh -0.006
(0.015)
Child en in he hh 0.011
(0.016)
Wo king 0.006
(0.020)
Re i ed 0.012
(0.020)
Homeowne 0.010
(0.014)
Female 0.053***
(0.016)
P ima y -0.008
(0.036)
High school 0.026
(0.035)
Voca ional aining 0.016
(0.037)
Uni e si y 0.032
(0.037)
Income ealiza ion -0.006
(0.006)
Financial asse s -0.000
(0.000)
Yea FE Yes
Cons an 0.760***
(0.083)
Obse a ions 4,620
R-squa ed 0.021
No es: S anda d e o s in pa en heses. ∗∗∗p<0.01,∗ ∗ p<0.05,∗p<0.1.
Second, we selec he ou come a iables ha a e no a ec ed by epo ed p obabili ies
(lowe bound, uppe bound and hei di e ence), and we un he same eg essions shown
in Table 2. Resul s epo ed in Table A.2 a e consis en wi h he benchma k esul s.
A.4. Sensi i i y analysis
We assess obus ness o esul s in Table 2in wo al e na i e samples. Table A.3 epo s
es ima e esul s o he sample ha includes pa ne s in addi ion o heads. Table A.4
also inco po a es esponden s epo ing income bands o household income in addi ion
33
Table A.2: Sample including esponden s wi h inconsis en p obabili ies (compa able ou -
comes)
(1) (2) (3)
Dep. a . LB UB UB-LB
Unexp. posi i e ∆y 0.129*** 0.185*** 0.056***
(0.021) (0.018) (0.015)
Unexp. nega i e ∆y (abs) -0.265*** -0.221*** 0.045***
(0.024) (0.020) (0.016)
Unemployed 0.054 -0.157 -0.211*
(0.185) (0.153) (0.126)
Unce ain y in NL 0.059 0.042 -0.018
(0.057) (0.048) (0.039)
Unempl. a e -0.016 -0.020 -0.004
(0.016) (0.013) (0.011)
Age 0.030** 0.027** -0.003
(0.013) (0.011) (0.009)
Pa ne in he hh 0.147 0.100 -0.048
(0.157) (0.130) (0.107)
Child en in he hh 0.130 -0.027 -0.157*
(0.118) (0.098) (0.080)
Wo king 0.266* 0.083 -0.183*
(0.151) (0.125) (0.103)
Re i ed 0.126 -0.064 -0.190*
(0.143) (0.119) (0.098)
Homeowne 0.158 0.197 0.039
(0.201) (0.167) (0.137)
Cons an 8.380*** 9.071*** 0.691
(0.996) (0.828) (0.679)
R-squa ed 0.055 0.078 0.008
Numbe o indi iduals 1,190 1,190 1,190
Obse a ions 4,620 4,620 4,620
No es: S anda d e o s in pa en heses. ∗∗∗p<0.01,∗ ∗ p<0.05,∗p<0.1.
34

o esponden s epo ing p ecise income alues.A.1 Ou key esul s a e con i med in bo h
al e na i e samples.
Table A.3: Sample including pa ne s
(1) (2) (3) (4) (5) (6) (7)
Dep. Va Exp. y LB UB UB-LB SD exp. Exp. e . Exp. e . (abs)
Unexp. posi i e ∆y 0.157*** 0.126*** 0.161*** 0.035** 0.004*** -0.120*** -0.114***
(0.017) (0.021) (0.018) (0.015) (0.001) (0.025) (0.022)
Unexp. nega i e ∆y (abs) -0.212*** -0.250*** -0.208*** 0.043*** 0.004*** 0.335*** -0.002
(0.018) (0.022) (0.018) (0.015) (0.001) (0.026) (0.023)
Unemployed -0.124 0.115 -0.145 -0.260** -0.011 0.308 -0.044
(0.151) (0.186) (0.153) (0.128) (0.009) (0.221) (0.195)
Unce ain y in NL 0.014 0.022 0.008 -0.015 0.002 -0.069 -0.036
(0.046) (0.057) (0.047) (0.039) (0.003) (0.068) (0.060)
Unempl. a e -0.028** -0.020 -0.020 -0.001 0.003*** 0.028 0.020
(0.012) (0.015) (0.013) (0.011) (0.001) (0.018) (0.016)
Age 0.021** 0.020 0.018* -0.002 -0.000 -0.013 -0.018
(0.010) (0.013) (0.011) (0.009) (0.001) (0.015) (0.014)
Pa ne in he hh 0.185 0.443*** 0.175 -0.267** -0.012 0.156 -0.059
(0.138) (0.170) (0.140) (0.117) (0.008) (0.202) (0.179)
Child en in he hh 0.078 0.142 0.062 -0.080 -0.009* -0.005 0.165
(0.096) (0.118) (0.097) (0.081) (0.005) (0.140) (0.124)
Wo king 0.139 0.070 0.134 0.063 0.005 0.296* -0.201
(0.113) (0.139) (0.115) (0.096) (0.006) (0.165) (0.146)
Re i ed -0.050 -0.050 -0.065 -0.015 -0.006 0.345** -0.093
(0.110) (0.136) (0.112) (0.094) (0.006) (0.161) (0.142)
Homeowne 0.370** 0.341* 0.360** 0.019 -0.008 -0.395* -0.129
(0.153) (0.188) (0.155) (0.130) (0.009) (0.224) (0.198)
Cons an 9.308*** 8.970*** 9.531*** 0.561 0.045 0.790 1.905*
(0.810) (0.999) (0.823) (0.689) (0.046) (1.185) (1.048)
R-squa ed 0.074 0.054 0.070 0.008 0.019 0.058 0.010
Numbe o indi iduals 1,447 1,447 1,447 1,447 1,447 1,447 1,447
Obse a ions 4,917 4,917 4,917 4,917 4,917 4,917 4,917
No es: S anda d e o s in pa en heses. ∗∗∗p<0.01,∗ ∗ p<0.05,∗p<0.1.
A.1In pa icula , we ely on he answe o ques ion: “Please indica e abou how much he o al ne
income o you household was o e he pe iod 1 Janua y [yea ] h ough 31 Decembe [yea ].” In his case,
possible answe s a e a se o h esholds anging om 1 (less han 8,000 eu os) o 11 (mo e han 75,000
eu os). Fo ins ance, h eshold 5 indica es incomes be ween 13,000 and 16,000 eu os. We use o obse ed
income he in e media e h eshold alue; ex eme h esholds a e se a hei bounda ies (i.e. 8,000 eu os
o h eshold 1 and 75,000 eu os o h eshold 11).
35
Table A.4: Sample including income in b acke s
(1) (2) (3) (4) (5) (6) (7)
Dep. a . Exp. y LB UB UB-LB SD exp. Exp. e . Exp. e . (abs)
Unexp. posi i e ∆y 0.112*** 0.103*** 0.112*** 0.009 0.001 -0.074*** -0.087***
(0.014) (0.016) (0.015) (0.010) (0.001) (0.019) (0.016)
Unexp. nega i e ∆y (abs) -0.202*** -0.219*** -0.204*** 0.015 -0.002 0.340*** 0.027
(0.023) (0.027) (0.024) (0.017) (0.002) (0.029) (0.025)
Unemployed 0.167 0.069 0.202 0.132 0.037** 0.459* 0.044
(0.204) (0.233) (0.207) (0.147) (0.016) (0.250) (0.218)
Unce ain y in NL -0.047 -0.031 -0.050 -0.019 0.002 0.009 -0.061
(0.057) (0.066) (0.058) (0.041) (0.005) (0.072) (0.062)
Unempl. a e -0.043*** -0.029 -0.039** -0.010 0.000 0.044** 0.010
(0.016) (0.018) (0.016) (0.012) (0.001) (0.020) (0.017)
Age 0.005 0.010 0.003 -0.008 -0.001 0.003 -0.008
(0.013) (0.015) (0.013) (0.009) (0.001) (0.016) (0.014)
Pa ne in he hh 0.042 0.019 0.023 0.004 0.002 0.135 -0.085
(0.159) (0.182) (0.161) (0.115) (0.012) (0.196) (0.171)
Child en in he hh 0.144 0.357*** 0.111 -0.245*** -0.043*** 0.008 0.166
(0.118) (0.135) (0.120) (0.085) (0.009) (0.145) (0.127)
Wo king 0.290* 0.344* 0.277* -0.067 -0.004 0.272 -0.247
(0.164) (0.188) (0.167) (0.119) (0.013) (0.198) (0.173)
Re i ed 0.153 0.202 0.143 -0.059 -0.005 0.219 -0.270
(0.161) (0.184) (0.163) (0.116) (0.013) (0.193) (0.168)
Homeowne -0.313* 0.284 -0.364** -0.648*** -0.095*** 0.078 0.290
(0.182) (0.208) (0.185) (0.132) (0.014) (0.229) (0.199)
Cons an 10.706*** 9.515*** 10.985*** 1.471** 0.158** -0.692 1.440
(0.972) (1.110) (0.986) (0.702) (0.076) (1.225) (1.066)
R-squa ed 0.031 0.025 0.031 0.008 0.016 0.036 0.009
Numbe o indi iduals 2,114 2,114 2,114 2,114 2,114 1,779 1,779
Obse a ions 7,637 7,637 7,637 7,637 7,637 6,527 6,527
No es: S anda d e o s in pa en heses. ∗∗∗p<0.01,∗ ∗ p<0.05,∗p<0.1.
36
B. Appendix: Omi ed a iable es
We use he me hod de eloped by Os e (2019) o e alua e he possible deg ee o omi ed
a iable bias unde he assump ion ha he selec ion on he obse ed con ols is co ela ed
wi h he selec ion o he obse ables. The me hod in Os e (2019) allows us o add ess
selec ion bias o one c i ical a iable only. Fo his eason, we do no dis inguish be ween
posi i e and nega i e unexpec ed income changes, bu we include a single eg esso o
he in e se hype bolic sine o he unexpec ed income change.B.1
Resul s a e epo ed in Table B.1. Following he pa ame iza ion sugges ed by Os e
(2019), we assume ha he deg ee o a ia ion which bo h obse ed and unobse ed
a iables can accoun o is p opo ional o he a iance explained by he co a ia es.B.2
The bo om line in Table B.1 epo s he deg ee o selec ion on unobse ables ela i e
o obse ables ( he pa ame e δ) ha would be necessa y o explain away he esul s.
The absolu e alue o δalways exceeds he ule o humb cu -o o 1 indica ed by Os e
(2019). These indings s ongly suppo he obus ness o ou indings o he omi ed
a iable bias.
B.1We also include, al e na i ely, he posi i e and nega i e unexpec ed income changes. The main
indings a e con i med.
B.2Mo e p ecisely, we assume ha Rmax = 1.3˜
R, whe e Rmax is he R2ob ained in he hypo he ical
eg ession o he dependen a iable on bo h obse ed and unobse ed eg esso s; ˜
Ris he R2o he
eg ession o he dependen a iable on obse ables.
37
Table B.1: Os e es on omi ed a iable bias
(1) (2) (3) (4) (5) (6) (7)
Dep. a . Exp. y LB UB UB-LB SD exp. Exp. e . Exp. e . (abs)
Unexp. ∆y 0.222*** 0.214*** 0.225*** 0.011 0.002** -0.270*** -0.082***
(0.015) (0.018) (0.015) (0.012) (0.001) (0.020) (0.018)
Unce ain y in NL 0.031 0.048 0.026 -0.022 0.001 -0.067 -0.064
(0.057) (0.068) (0.057) (0.046) (0.003) (0.078) (0.069)
Unempl. a e -0.024 -0.006 -0.017 -0.012 0.002** 0.031 0.011
(0.015) (0.018) (0.015) (0.012) (0.001) (0.021) (0.018)
Age 0.027** 0.027* 0.024* -0.003 -0.001 -0.025 -0.016
(0.013) (0.015) (0.013) (0.010) (0.001) (0.017) (0.015)
Pa ne in he hh 0.084 0.105 0.080 -0.025 -0.007 0.226 -0.032
(0.159) (0.190) (0.161) (0.129) (0.008) (0.220) (0.194)
Child en in he hh -0.002 0.195 -0.027 -0.222** -0.017*** -0.055 0.234*
(0.114) (0.137) (0.116) (0.092) (0.006) (0.158) (0.139)
Wo king 0.219** 0.245* 0.207* -0.037 -0.003 0.082 -0.199
(0.111) (0.133) (0.113) (0.090) (0.006) (0.154) (0.136)
Re i ed -0.013 0.035 -0.029 -0.064 -0.008 0.188 -0.045
(0.117) (0.140) (0.119) (0.095) (0.006) (0.162) (0.143)
Homeowne 0.224 0.178 0.226 0.048 -0.001 -0.223 -0.140
(0.192) (0.230) (0.195) (0.156) (0.010) (0.267) (0.235)
Cons an 8.905*** 8.539*** 9.148*** 0.609 0.077 1.523 1.913
(0.983) (1.177) (0.997) (0.794) (0.051) (1.362) (1.201)
Os e del a 89.241 -59.883 44.5152 37.177 33.654 -15.262 19.125
R-squa ed 0.083 0.055 0.082 0.004 0.012 0.062 0.010
Numbe o indi iduals 1,064 1,064 1,064 1,064 1,064 1,064 1,064
Obse a ions 3,767 3,767 3,767 3,767 3,767 3,767 3,767
No es: S anda d e o s in pa en heses. ∗∗∗p<0.01,∗ ∗ p<0.05,∗p<0.1.
38
Table C.5: Benchma k analysis using unexpec ed income change size
(1) (2) (3) (4) (5) (6) (7)
VARIABLES Exp. y LB UB UB-LB SD exp Fo . e . Fo . e . (abs)
I unexp. pos. ∆y -0.032 0.036 -0.044 -0.080 -0.005 -0.082 0.226**
(0.083) (0.099) (0.084) (0.066) (0.004) (0.114) (0.101)
I la ge pos. ∆y 0.006 0.057 0.008 -0.048 0.002 -0.074 -0.019
(0.072) (0.085) (0.073) (0.058) (0.004) (0.099) (0.087)
I la ge neg. ∆y -0.015 0.138 -0.019 -0.157** -0.002 -0.101 0.052
(0.076) (0.091) (0.078) (0.061) (0.004) (0.105) (0.093)
Unexp. posi i e ∆y -0.000 0.160 0.047 -0.114 0.000 0.132 -0.825
(0.851) (1.016) (0.864) (0.685) (0.044) (1.174) (1.037)
Unexp. nega i e ∆y (abs) -0.721 -0.552 -0.771 -0.219 -0.009 -1.182 2.586**
(0.910) (1.086) (0.924) (0.732) (0.047) (1.255) (1.109)
Unexp. posi i e ∆y*I la ge pos. ∆y 0.201 -0.027 0.161 0.188 0.004 -0.280 0.688
(0.852) (1.017) (0.865) (0.685) (0.044) (1.174) (1.038)
Unexp. nega i e ∆y (abs)*I la ge neg. ∆y 0.468 0.229 0.518 0.289 0.010 1.577 -2.513**
(0.910) (1.087) (0.924) (0.732) (0.047) (1.255) (1.110)
Unemployed -0.154 0.018 -0.166 -0.184 -0.002 0.360 -0.077
(0.182) (0.217) (0.185) (0.146) (0.009) (0.251) (0.222)
Unce ain y in NL 0.032 0.046 0.026 -0.020 0.001 -0.067 -0.061
(0.057) (0.068) (0.057) (0.046) (0.003) (0.078) (0.069)
Unempl. a e -0.024 -0.007 -0.017 -0.010 0.002** 0.031 0.012
(0.015) (0.018) (0.015) (0.012) (0.001) (0.021) (0.018)
Age 0.027** 0.026* 0.024* -0.002 -0.001 -0.022 -0.017
(0.013) (0.015) (0.013) (0.010) (0.001) (0.017) (0.015)
Pa ne in he hh 0.094 0.155 0.089 -0.067 -0.008 0.199 -0.045
(0.160) (0.191) (0.162) (0.128) (0.008) (0.220) (0.195)
Child en in he hh -0.006 0.185 -0.031 -0.216** -0.017*** -0.044 0.231*
(0.114) (0.136) (0.116) (0.092) (0.006) (0.157) (0.139)
Wo king 0.140 0.264 0.121 -0.143 -0.004 0.250 -0.221
(0.145) (0.173) (0.147) (0.117) (0.007) (0.200) (0.177)
Re i ed -0.070 0.074 -0.093 -0.167 -0.010 0.296 -0.055
(0.141) (0.168) (0.143) (0.113) (0.007) (0.194) (0.172)
Homeowne 0.228 0.192 0.229 0.036 -0.002 -0.263 -0.105
(0.193) (0.230) (0.196) (0.155) (0.010) (0.266) (0.235)
Cons an 9.045*** 8.555*** 9.302*** 0.746 0.080 1.298 1.812
(0.991) (1.183) (1.006) (0.797) (0.051) (1.366) (1.207)
R-squa ed 0.084 0.062 0.083 0.015 0.016 0.073 0.016
Numbe o indi iduals 1,064 1,064 1,064 1,064 1,064 1,064 1,064
Obse a ions 3,767 3,767 3,767 3,767 3,767 3,767 3,767
No es: S anda d e o s in pa en heses. ∗ ∗ ∗p<0.01,∗ ∗ p<0.05,∗p<0.1.La ge posi i e and nega i e unexpec ed income
changes a e de ined as unexpec ed income change la ge han hei espec i e median.
45

Table C.6: Benchma k analysis including lagged unexpec ed income changes
(1) (2) (3) (4) (5) (6) (7)
Dep. a Exp. y LB UB UB-LB SD exp. Exp. e . Exp. e . (abs)
Unexp. posi i e ∆y 0.211*** 0.117*** 0.215*** 0.098*** 0.004** -0.205*** -0.140***
(0.030) (0.037) (0.031) (0.026) (0.002) (0.042) (0.037)
Unexp. nega i e ∆y (abs) -0.356*** -0.383*** -0.351*** 0.031 0.003* 0.505*** 0.144***
(0.028) (0.034) (0.029) (0.024) (0.002) (0.039) (0.034)
Unexp. posi i e ∆y (lag) 0.094*** 0.133*** 0.094*** -0.039 -0.001 -0.017 -0.167***
(0.027) (0.033) (0.028) (0.024) (0.002) (0.038) (0.033)
Unexp. nega i e ∆y (abs, lag) -0.153*** -0.118*** -0.154*** -0.036 -0.001 0.259*** 0.041
(0.032) (0.039) (0.032) (0.027) (0.002) (0.044) (0.038)
Unemployed -0.155 -0.181 -0.130 0.051 0.012 0.565* -0.278
(0.221) (0.270) (0.226) (0.193) (0.013) (0.309) (0.269)
Unce ain y in NL -0.085 -0.082 -0.093 -0.011 -0.001 0.092 -0.001
(0.071) (0.086) (0.072) (0.062) (0.004) (0.099) (0.086)
Unempl. a e 0.031 0.035 0.036* 0.000 0.001 -0.023 -0.012
(0.021) (0.025) (0.021) (0.018) (0.001) (0.029) (0.025)
Age -0.002 -0.000 -0.005 -0.005 -0.001 0.013 -0.004
(0.016) (0.020) (0.016) (0.014) (0.001) (0.022) (0.019)
Pa ne in he hh 0.161 0.122 0.183 0.061 0.011 -0.030 -0.349
(0.234) (0.285) (0.239) (0.203) (0.014) (0.327) (0.284)
Child en in he hh 0.055 0.147 0.009 -0.138 -0.020* -0.081 0.028
(0.175) (0.214) (0.179) (0.153) (0.011) (0.245) (0.213)
Wo king -0.096 -0.133 -0.075 0.058 0.018 0.524** -0.090
(0.189) (0.231) (0.193) (0.165) (0.012) (0.265) (0.230)
Re i ed 0.047 0.046 0.048 0.002 0.002 0.240 -0.218
(0.177) (0.216) (0.181) (0.154) (0.011) (0.247) (0.215)
Homeowne 0.108 0.085 0.114 0.029 0.005 -0.122 -0.022
(0.256) (0.313) (0.262) (0.223) (0.016) (0.358) (0.311)
Cons an 11.171*** 10.958*** 11.402*** 0.444 0.072 -1.520 1.233
(1.247) (1.525) (1.275) (1.087) (0.076) (1.744) (1.517)
R-squa ed 0.162 0.112 0.155 0.019 0.020 0.148 0.042
Numbe o indi iduals 706 706 706 706 706 706 706
Obse a ions 2,032 2,032 2,032 2,032 2,032 2,032 2,032
No es: S anda d e o s in pa en heses. ∗∗∗p<0.01,∗ ∗ p<0.05,∗p<0.1.
46
D. Appendix: Addi ional ables on he e ogenei y
This Appendix p esen s he ull se o es ima ed coe icien s co esponding o he esul s
in Table 3, along wi h desc ip i e s a is ics o he h ee subsamples. Mo e p ecisely, we
epo he cha ac e is ics o he bo om and op 33% income g oups (see Table D.1) and
he benchma k analysis spli by sample g oup: Bo om 33% (see Table D.2), middle 33%
(see Table D.3) and op 33% (see Table D.4).
Table D.1: Cha ac e is ics in he bo om and op 33% income g oups
Va iable Label Bo om Top - es
Income a iables
Expec ed income Exp. y 10.301 11.364 -22.098***
Lowe bound exp. inc. LB 10.139 11.222 -19.365 ***
Uppe bound exp. inc. UB 10.355 11.420 -21.910***
Uppe - Lowe bound UB-LB 0.216 0.198 0.524
SD expec ed income SD exp. 0.028 0.034 -2.826***
Expec a ion e o Exp. e . -0.130 0.045 -3.163***
Expec a ion e o (abs.) Exp. e . (abs) 0.716 0.360 7.018***
Key explana o y a iables
Unexpec ed posi i e income change Unexp. posi i e ∆y 0.178 0.169 0.571
Unexpec ed nega i e income change (abs.) Unexp. nega i e ∆y (abs) 0.283 0.103 9.854***
Unemployed 0.039 0.005 5.864***
Unce ain y in NL 5.002 4.973 1.200
Unempl. a e 5.570 5.639 -1.347
Con ol a iables
Age 61.545 58.073 7.136***
Pa ne in he hh 0.449 0.885 -26.315***
Child en in he hh 0.149 0.275 -7.792***
Wo king 0.298 0.576 -14.537***
Re i ed 0.434 0.396 1.922*
Homeowne 0.567 0.931 -23.376***
Fu he a iables
Female 0.360 0.116 15.078***
College educ. 0.052 0.301 -17.030***
Voca ional aining educ. 0.219 0.097 8.491***
High School educ. 0.323 0.470 -7.568***
Low educ. 0.364 0.112 15.620***
No educ. 0.035 0.013 3.638***
Financial li e a e 0.287 0.527 -12.456***
Media inancial sou ce 0.423 0.589 -8.336***
Income ( housands) 18.273 52.181 -43.111***
Financial asse s ( housands) 38.236 93.518 -10.605***
Obse a ions 1,197 1,304
No es: The las column epo s he alue o a - es compa ing he mean o he bo om and op 33% o he income
dis ibu ion. ∗∗∗p<0.01,∗ ∗ p<0.05,∗p<0.1.
47
Table D.2: Subsample o bo om 33% income ea ne s ( ull ou pu )
(1) (2) (3) (4) (5) (6) (7)
Dep. a . Exp. y LB UB UB-LB SD exp. Exp. e . Exp. e . (abs)
Unexp. posi i e ∆y 0.265*** 0.241*** 0.269*** 0.028 0.002 -0.201*** -0.110**
(0.038) (0.044) (0.039) (0.030) (0.002) (0.054) (0.045)
Unexp. nega i e ∆y (abs) -0.098** -0.173*** -0.099** 0.074** 0.001 0.263*** -0.129***
(0.038) (0.044) (0.039) (0.030) (0.002) (0.054) (0.045)
Unemployed -0.196 0.024 -0.281 -0.304 -0.033* 0.547 -0.216
(0.342) (0.397) (0.348) (0.264) (0.017) (0.480) (0.405)
Unce ain y in NL -0.035 0.019 -0.047 -0.066 -0.003 -0.149 -0.082
(0.134) (0.155) (0.136) (0.103) (0.007) (0.188) (0.158)
Unempl. a e -0.043 -0.026 -0.038 -0.012 0.000 0.044 0.011
(0.035) (0.041) (0.036) (0.027) (0.002) (0.049) (0.042)
Age 0.040 0.047 0.032 -0.014 -0.002 -0.020 -0.064*
(0.030) (0.035) (0.031) (0.023) (0.002) (0.042) (0.036)
Pa ne in he hh -0.428 -0.251 -0.466 -0.214 -0.050** 0.740 -0.352
(0.391) (0.454) (0.398) (0.303) (0.020) (0.549) (0.464)
Child en in he hh -0.219 -0.016 -0.293 -0.277 -0.051*** 0.096 0.469
(0.312) (0.362) (0.317) (0.241) (0.016) (0.438) (0.370)
Wo king 0.547* 0.813** 0.494* -0.319 -0.018 -0.154 -0.763**
(0.282) (0.328) (0.287) (0.218) (0.014) (0.396) (0.335)
Re i ed -0.173 0.039 -0.184 -0.223 -0.011 0.310 0.062
(0.262) (0.304) (0.267) (0.203) (0.013) (0.368) (0.311)
Homeowne 0.301 0.100 0.294 0.195 0.004 -0.702 0.097
(0.602) (0.699) (0.613) (0.466) (0.031) (0.846) (0.714)
Cons an 8.189*** 7.125** 8.795*** 1.670 0.203* 1.502 5.330*
(2.379) (2.763) (2.422) (1.840) (0.121) (3.342) (2.824)
R-squa ed 0.096 0.079 0.093 0.015 0.028 0.063 0.031
Numbe o indi iduals 390 390 390 390 390 390 390
Obse a ions 1,197 1,197 1,197 1,197 1,197 1,197 1,197
No es: S anda d e o s in pa en heses. The sample includes esponden s wi h a e age income in he bo om 33% o he
dis ibu ion. ∗∗∗p<0.01,∗ ∗ p<0.05,∗p<0.1.
48
Table D.3: Subsample o middle 33% income ea ne s ( ull ou pu )
(1) (2) (3) (4) (5) (6) (7)
Dep. a . Exp. y LB UB UB-LB SD exp. Exp. e . Exp. e . (abs)
Unexp. posi i e ∆y 0.245*** 0.071 0.254*** 0.183*** 0.010*** -0.265*** -0.220***
(0.034) (0.043) (0.034) (0.033) (0.002) (0.050) (0.045)
Unexp. nega i e ∆y (abs) -0.239*** -0.263*** -0.236*** 0.028 0.003 0.371*** 0.099
(0.045) (0.059) (0.047) (0.045) (0.003) (0.067) (0.060)
Unemployed -0.045 0.062 0.020 -0.042 0.028* -0.158 0.135
(0.235) (0.303) (0.241) (0.231) (0.015) (0.348) (0.312)
Unce ain y in NL 0.082 0.064 0.066 0.002 -0.007 -0.059 -0.076
(0.077) (0.099) (0.078) (0.075) (0.005) (0.113) (0.102)
Unempl. a e -0.033 -0.005 -0.027 -0.022 0.002 0.027 0.041
(0.021) (0.027) (0.021) (0.020) (0.001) (0.030) (0.027)
Age 0.029* 0.030 0.027 -0.003 -0.002* -0.028 -0.011
(0.017) (0.022) (0.017) (0.017) (0.001) (0.025) (0.022)
Pa ne in he hh 0.282 0.279 0.271 -0.008 0.003 -0.112 0.033
(0.191) (0.246) (0.196) (0.188) (0.012) (0.283) (0.254)
Child en in he hh 0.056 0.429** 0.048 -0.382** -0.009 -0.063 0.257
(0.158) (0.204) (0.162) (0.156) (0.010) (0.234) (0.210)
Wo king -0.057 -0.075 -0.025 0.050 0.008 0.063 0.295
(0.198) (0.255) (0.203) (0.195) (0.012) (0.293) (0.263)
Re i ed -0.123 -0.092 -0.119 -0.028 0.003 0.071 0.311
(0.196) (0.252) (0.201) (0.193) (0.012) (0.290) (0.260)
Homeowne 0.228 0.287 0.212 -0.075 -0.021 -0.007 -0.202
(0.212) (0.273) (0.217) (0.208) (0.013) (0.314) (0.281)
Cons an 8.681*** 8.306*** 8.905*** 0.600 0.168** 1.826 1.085
(1.333) (1.717) (1.365) (1.311) (0.084) (1.975) (1.771)
R-squa ed 0.102 0.040 0.099 0.041 0.040 0.074 0.037
Numbe o indi iduals 343 343 343 343 343 343 343
Obse a ions 1,266 1,266 1,266 1,266 1,266 1,266 1,266
No es: S anda d e o s in pa en heses. The sample includes esponden s wi h a e age income in he middle 33% o he
dis ibu ion. ∗∗∗p<0.01,∗ ∗ p<0.05,∗p<0.1.
49
Table D.4: Subsample o op 33% income ea ne s ( ull ou pu )
(1) (2) (3) (4) (5) (6) (7)
Dep. a . Exp. y LB UB UB-LB SD exp. Exp. e . Exp. e . (abs)
Unexp. posi i e ∆y 0.010 0.005 0.015 0.010 0.004** 0.030 -0.010
(0.039) (0.047) (0.039) (0.029) (0.002) (0.050) (0.047)
Unexp. nega i e ∆y (abs) -0.649*** -0.632*** -0.650*** -0.017 -0.000 0.787*** 0.423***
(0.044) (0.053) (0.044) (0.033) (0.002) (0.057) (0.054)
Unemployed -0.552 -0.533 -0.555 -0.022 0.003 1.269** -0.067
(0.432) (0.526) (0.434) (0.327) (0.019) (0.562) (0.529)
Unce ain y in NL 0.007 0.019 0.014 -0.006 0.009*** 0.017 -0.016
(0.081) (0.099) (0.081) (0.061) (0.004) (0.106) (0.099)
Unempl. a e -0.003 0.003 0.004 0.002 0.002** 0.022 -0.007
(0.022) (0.026) (0.022) (0.016) (0.001) (0.028) (0.027)
Age 0.013 0.001 0.012 0.011 0.001 -0.015 0.007
(0.018) (0.022) (0.018) (0.014) (0.001) (0.024) (0.023)
Pa ne in he hh 0.358 0.287 0.389 0.102 0.025** 0.082 0.051
(0.266) (0.324) (0.267) (0.201) (0.012) (0.346) (0.326)
Child en in he hh 0.043 0.147 0.025 -0.122 -0.008 -0.117 0.132
(0.148) (0.180) (0.149) (0.112) (0.006) (0.193) (0.182)
Wo king -0.412 -0.400 -0.460 -0.060 -0.001 1.380*** -0.160
(0.312) (0.379) (0.313) (0.236) (0.014) (0.406) (0.382)
Re i ed -0.448 -0.360 -0.500 -0.140 -0.011 1.180*** -0.166
(0.307) (0.374) (0.308) (0.232) (0.013) (0.399) (0.376)
Homeowne 0.019 0.006 0.051 0.046 0.023* -0.166 -0.212
(0.309) (0.377) (0.311) (0.234) (0.014) (0.402) (0.379)
Cons an 10.732*** 11.217*** 10.759*** -0.458 -0.116* -0.589 0.310
(1.438) (1.750) (1.443) (1.087) (0.063) (1.870) (1.761)
R-squa ed 0.191 0.132 0.191 0.006 0.051 0.172 0.066
Numbe o indi iduals 331 331 331 331 331 331 331
Obse a ions 1,304 1,304 1,304 1,304 1,304 1,304 1,304
No es: S anda d e o s in pa en heses. The sample includes esponden s wi h a e age income in he op 33% o he
dis ibu ion. ∗∗∗p<0.01,∗ ∗ p<0.05,∗p<0.1.
50

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