Probabilistic expectations in developing countries

Publication Type:
Journal Article
Citation:
Annual Review of Economics, 2014, 6 pp. 1 - 20
Issue Date:
2014-01-01
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Many decisions are made under uncertainty, and individuals are likely to form subjective expectations about the probabilities of events that are relevant to their decisions. I review here a recent and growing literature that uses probabilistic expectations elicited from survey respondents in developing countries. I first present an illustrative model of one particular decision under uncertainty-the choice of a college-to exemplify the importance of subjective expectations data for identification purposes. I then review existing evidence emphasizing that it is feasible to elicit probabilities from survey respondents in low-literacy settings and describe common patterns of answers. Finally, I describe existing applications, many of which seek to assess how expectations influence behavior, in various domains, including health, education, agricultural production, and migration. © 2014 by Annual Reviews. All rights reserved.
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