Anchoring Effects in the HRS: Experimental and Nonexperimental Evidence

The Health and Retirement Study (HRS) and a number of other major household surveys use unfolding brackets to reduce item nonresponse. However, the initial entry point into a bracketing sequence is likely to act as an anchor or point of reference to the respondent: The distribution of responses among those bracketed would be influenced by the entry point. For example, when the initial entry point is high the distribution will be shifted to the right one to believe that holdings of the particular asset are greater than they truly are. This paper has two goals. The first is to analyze some experimental data on housing value from HRS wave 3 for anchoring effects. The second is to compare the distributions of assets in HRS waves 1 and 2 for evidence about any anchoring effects that may have been caused by changes in the entry points between the waves. Both the experimental data on housing values and the nonexperimental data from HRS waves 1 and 2 on assets show anchoring effects. The conclusion is that to estimate accurately wealth change in panel data sets, we need a method of correcting for anchoring effects such as random entry into the bracketing sequence.