The PSC Brown Bag Series runs live and on Zoom this year, Mondays from noon to 1.

Speaker: Basit Zafar, University of Michigan

Seminar Date: 3/04/24

The Silent Treatment? Imperfect Correlation of Spousal Expectations and Communication Frictions

Current models of household decision-making assume that partners share information perfectly and hold similar expectations. However, we lack empirical evidence about spouses’ expectations for the same outcomes and the level of information sharing within couples. To address this gap, we create an online panel of 2,200 middle-aged spouses. In this study, the focus is on expectations about Social Security (SS) benefits, a primary income source for those over 65. Our descriptive analysis reveals that only a minority of couples have similar expectations about a given spouse’s benefit: just a third of the couples have a difference in monthly benefit expectations smaller than $100, with an overall correlation of 0.68. The correlation is lower in couples with shorter marital duration, with lower marital satisfaction, and where partners disagree about the quality of the relationship. This suggests that communication frictions likely play a role in the imperfect correlation in expectations. We then provide causal evidence on sharing of information within couples by leveraging randomized information provision of future benefits (as per the SS calculator) and a sequential survey design within the couple (with the spousal surveys separated by 3 days, on average). The information treatment reduces the absolute gap between expectations and benefits calculated by SS calculator for the first-interviewed spouse by about 22 pp. Zafar et al then investigate whether this information spills over to the second spouse. Consistent with some information sharing, having a treated spouse leads to a secondary spouse having an absolute gap that is 10-12pp lower; that is, the spillovers are almost half as large as the treatment impact on the first-interviewed spouse. These spillovers are larger when both spouses agree that the first spouse is more financially knowledgeable. Interestingly, there is less information sharing among couples who disagree on their marital satisfaction. Finally, they investigate whether information provision helps couples in joint decision making, and find some suggestive evidence that providing information to both spouses improves alignment of expected retirement plans for a given spouse.

Basit Zafar is an applied microeconomist. His research is focused on labor economics, economics of education, and household finance. Specifically, his work seeks to understand how individuals make decisions under uncertainty. Professor Zafar’s research employs a disparate set of empirical methods and techniques, including the use of subjective expectations data and experimental data.

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