Working Paper: NBER ID: w11361
Authors: Manju Puri; David Robinson
Abstract: This paper presents some of the first large-scale survey evidence linking optimism to major economic choices. We create a novel measure of optimism using the Survey of Consumer Finance by comparing a person's self-reported life expectancy to that implied by statistical tables. Optimists are more likely to believe that future economic conditions will improve. Self-employed respondents are more optimistic than regular wage earners. In general, more optimistic people work harder and anticipate longer age-adjusted work careers. They are more likely to remarry, conditional on divorce. In addition, they tilt their investment portfolios more toward individual stocks.
Keywords: optimism; economic choice; self-employment; portfolio choice
JEL Codes: G1; D1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| optimism (D84) | self-employment (L26) |
| optimism (D84) | hours worked (J22) |
| optimism (D84) | career length (Z22) |
| optimism (D84) | likelihood of remarriage (J12) |
| optimism (D84) | ownership of individual stocks (G32) |
| optimism (D84) | allocation of equity wealth to investments (G11) |