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Denial of Death and Economic Behavior

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  • Kopczuk Wojciech

    ()
    (Columbia University)

  • Slemrod Joel

    ()
    (University of Michigan)

Abstract

We model denial of death and its effect on economic behavior. Attempts to reduce death anxiety and the possibility of denial of mortality-relevant information interact with intertemporal choices and may lead to time-inconsistent behavior and other “behavioral” phenomena. In the model, repression of signals of mortality leads to underconsumption for unsophisticated individuals, but forward-sophisticated individuals may over-consume in anticipation of future denial and may seek ways to commit to act according to one’s mortality prospects as currently perceived. We show that the mere possibility of engaging in this kind of denial leads to time-inconsistent but efficient behavior. Refusal to face up to the reality of death may help explain a wide range of empirical phenomena, including the underutilization of tax-advanced inter vivos gifts and inadequate purchase of life insurance.

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Bibliographic Info

Article provided by De Gruyter in its journal The B.E. Journal of Theoretical Economics.

Volume (Year): 5 (2005)
Issue (Month): 1 (August)
Pages: 1-26

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Handle: RePEc:bpj:bejtec:v:advances.5:y:2005:i:1:n:5

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  1. Poterba, James, 2001. "Estate and gift taxes and incentives for inter vivos giving in the US," Journal of Public Economics, Elsevier, vol. 79(1), pages 237-264, January.
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  12. V. Kerry Smith & Donald H. Taylor & Frank A. Sloan, 2001. "Longevity Expectations and Death: Can People Predict Their Own Demise?," American Economic Review, American Economic Association, vol. 91(4), pages 1126-1134, September.
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