Income expectations during the lockdown: evidence from a student survey

ABSTRACT

We investigate the effect of the COVID-19 pandemic on students’ perception of future economic conditions. Our results show that students’ perception of the current situation is a strong predictor of future expectations. Moreover, students whose parents are self-employed seem to be more concerned about the future. We also detect that an increase in anxiety due to the pandemic and lockdown leads to negative expectations. We find that students seem to anticipate the long run effects of the pandemic by having increasingly pessimistic expectations about the future. This appears to be in line with both rational expectation theory, in which they consider the current situation as a signal for long-run decrease of future expectations, and at the same time, with adaptive expectation schemes anchored by their knowledge on historical pandemic situations.

KEYWORDS:

• expectations
• negative shock
• lockdown
• Italy

JEL CLASSIFICATION:

• D84
• D81

Supplementary material

Supplemental data for this article can be accessed online at https://doi.org/10.1080/13504851.2022.2096858

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ The data are collected by Busetta et al. (2021) to analyse the effects of the pandemic on students’ anxiety disorder.

² Since only 11 respondents report to expect ‘much better’ economic conditions, we merge these with observations reporting ‘better’ economic conditions. Therefore, our dependent variable is specified on a 4-point scale.

³ Additional details on this analysis are reported in section A3 and A4 in the online Appendix.

⁴ Brant test rejected the null hypothesis of proportional odds on the following variables: current economic situation, working students.

⁵ Transition matrixes and steady states probabilities for gender and geographical location are shown in the online Appendix, section A4.

⁶ Hurd and Rohwedder (2010) report similar impact on long-run expectations by analysing the aftermath of the Great Recession.

⁷ For the sake of space we do not present standard errors here, which can be found in section A5 in the online Appendix.