Attention Allocation, Macroeconomic Expectations, and Consumption Behavior

Abstract

This paper empirically investigates individuals' attention allocation behavior and its economic implications on expectation formation and consumption choice. We measure attention with data from the Michigan Survey of Consumers (MSC), in which respondents were asked to report what economic news they heard recently. We first show that individuals' wealth, education level, and the current economic environment play important roles in determining their attention allocation behavior. We also find that paying attention to specific news groups affects individuals' macroeconomic expectations, their forecasting biases and attitudes towards purchasing durable goods and homes.