The Federal Reserve Bank of New York works to promote sound and well-functioning financial systems and markets through its provision of industry and payment services, advancement of infrastructure reform in key markets and training and educational support to international institutions.
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Economic Education improves public knowledge about the Federal Reserve System, monetary policy implementation, and promoting financial stability through the Museum and programs for K-16 students and educators, and the community.
This paper investigates how college students update their future earnings beliefs using a unique “information” experiment: We provide college students true information about the population distribution of earnings, and observe how this information causes them to update their future earnings beliefs. We show that college students are substantially misinformed about population earnings, logically revise their self-earnings beliefs, and have larger revisions when the information is more specific and is “good” news. We classify the updating behaviors observed and find that the majority of students are non-Bayesian updaters. While the average welfare gains from our information provision are positive, we show that counterfactually imposing Bayesian processing of information vastly overestimates the gains from the intervention. Finally, we present evidence that our intervention has long-lasting effects on students’ earnings beliefs.