American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Uncertainty and Change: Survey Evidence of Firms' Subjective Beliefs
American Economic Review
(pp. 2806–49)
Abstract
This paper studies how managers plan under uncertainty. In a new panel survey of German manufacturing firms, we observe both forecasts of sales growth and a quantitative measure of subjective uncertainty. We show that subjective uncertainty reflects change experienced by firms: It is high when growth is either unusually low or unusually high. Subjective uncertainty is more than conditional volatility; while more volatile firms are typically more uncertain, experienced change alone increases uncertainty, consistent with a model of learning. Uncertainty over our sample is mostly idiosyncratic but varies substantially over time and leads managers to plan lower employment and prices.Citation
Bachmann, Rüdiger, Kai Carstensen, Stefan Lautenbacher, Manuel Menkhoff, and Martin Schneider. 2026. "Uncertainty and Change: Survey Evidence of Firms' Subjective Beliefs." American Economic Review 116 (8): 2806–49. DOI: 10.1257/aer.20240056Additional Materials
JEL Classification
- C83 Survey Methods; Sampling Methods
- D22 Firm Behavior: Empirical Analysis
- E20 Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy: General (includes Measurement and Data)
- E23 Macroeconomics: Production