NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Maritta Paloviita

Bank of Finland
PO Box 160
00101 Helsinki
Finland

E-Mail: maritta.paloviita@bof.fi
Institutional Affiliation: Bank of Finland

NBER Working Papers and Publications

January 2019IQ, Expectations, and Choice
with Francesco D’Acunto, Daniel Hoang, Michael Weber: w25496
We use administrative and survey-based micro data to study the relationship between cognitive abilities (IQ), the formation of economic expectations, and the choices of a representative male population. Men above the median IQ (high-IQ men) display 50% lower forecast errors for inflation than other men. The inflation expectations and perceptions of high-IQ men, but not others, are positively correlated over time. High-IQ men are also less likely to round and to forecast implausible values. In terms of choice, only high-IQ men increase their propensity to consume when expecting higher inflation as the consumer Euler equation prescribes. High-IQ men are also forward-looking -- they are more likely to save for retirement conditional on saving. Education levels, income, socio-economic status, ...
 
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