Forecasts: Consumption, Production, and Behavioral Responses

• Development Workshop

Date and Location

Tuesday, December 8, 2020, 4:10 PM - 5:30 PM
933 988 20491, online Zoom

Abstract

Economic theory predicts forecasts are an important determinant of welfare. In developing countries, however, limited information and human capital may make it difficult for agents to produce accurate, precise forecasts. This plausibly limits the scope for optimal responses to uncertain future events. We study the effects on forecast consumption, production, and behavioral responses from two randomized interventions in Lahore, Pakistan: 1) provision of one-day ahead air pollution forecasts; and 2) general forecasting training aimed at reducing behavioral biases. On average, subjects exposed to forecasts were willing to pay roughly 60 percent of the cost of mobile internet access to continue receiving them. Both interventions reduced air pollution forecast error, and receipt of forecasts increased demand for protective masks. These results document substantial demand for forecasts among urban residents in the developing world. They suggest that modest educational interventions may durably improve forecasting-relevant human capital.

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