Business-Level Expectations and Uncertainty
December 2020
Working Paper Number:
CES-20-41
Abstract
The Census Bureau's 2015 Management and Organizational Practices Survey (MOPS) utilized innovative methodology to collect five-point forecast distributions over own future shipments, employment, and capital and materials expenditures for 35,000 U.S. manufacturing plants. First and second moments of these plant-level forecast distributions covary strongly with first and second moments, respectively, of historical outcomes. The first moment of the distribution provides a measure of business' expectations for future outcomes, while the second moment provides a measure of business' subjective uncertainty over those outcomes. This subjective uncertainty measure correlates positively with financial risk measures. Drawing on the Annual Survey of Manufactures and the Census of Manufactures for the corresponding realizations, we find that subjective expectations are highly predictive of actual outcomes and, in fact, more predictive than statistical models fit to historical data. When respondents express greater subjective uncertainty about future outcomes at their plants, their forecasts are less accurate. However, managers supply overly precise forecast distributions in that implied confidence intervals for sales growth rates are much narrower than the distribution of actual outcomes. Finally, we develop evidence that greater use of predictive computing and structured management practices at the plant and a more decentralized decision-making process (across plants in the same firm) are associated with better forecast accuracy.
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:
production,
econometric,
manufacturing,
sale,
managerial,
forecast,
management
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The model is able to label words and phrases by part-of-speech,
including "organizations." By filtering for frequent words and phrases labeled as "organizations", papers are
identified to contain references to specific institutions, datasets, and other organizations.
:
Census of Manufactures,
Annual Survey of Manufactures,
American Economic Association,
National Science Foundation,
Center for Economic Studies,
Ordinary Least Squares,
National Bureau of Economic Research,
Labor Productivity,
Bureau of Economic Analysis,
Quarterly Journal of Economics,
Federal Reserve Bank,
American Economic Review,
Journal of Econometrics,
Review of Economic Studies,
University of Chicago,
Princeton University Press,
Federal Reserve System,
Penn State University,
Census of Manufacturing Firms,
Cambridge University Press,
Cornell University,
Journal of Economic Perspectives,
Journal of Economic Literature,
Postal Service,
Board of Governors,
Business Register,
Sloan Foundation,
Kauffman Foundation,
Federal Reserve Board of Governors,
Business R&D and Innovation Survey,
Management and Organizational Practices Survey,
National Center for Science and Engineering Statistics
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