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The Predictive Validity of Subjective Mortality Expectations: Evidence From the Health and Retirement Study

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  • Todd Elder

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Abstract

Several recent studies suggest that individual subjective survival forecasts are powerful predictors of both mortality and behavior. Using 15 years of longitudinal data from the Health and Retirement Study, I present an alternative view. Across a wide range of ages, predictions of in-sample mortality rates based on subjective forecasts are substantially less accurate than predictions based on population life tables. Subjective forecasts also fail to capture fundamental properties of senescence, including increases in yearly mortality rates with age. To shed light on the mechanisms underlying these biases, I develop and estimate a latent-factor model of how individuals form subjective forecasts. The estimates of this model’s parameters imply that these forecasts incorporate several important sources of measurement error that arguably swamp the useful information they convey. Copyright Population Association of America 2013

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File URL: http://hdl.handle.net/10.1007/s13524-012-0164-2
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Bibliographic Info

Article provided by Springer in its journal Demography.

Volume (Year): 50 (2013)
Issue (Month): 2 (April)
Pages: 569-589

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Handle: RePEc:spr:demogr:v:50:y:2013:i:2:p:569-589

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Web page: http://www.springer.com/economics/journal/13524

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Related research

Keywords: Subjective survival forecasts; Expectations; Life tables;

References

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  1. Michael D. Hurd & James P. Smith & Julie M. Zissimopoulos, 2004. "The effects of subjective survival on retirement and Social Security claiming," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(6), pages 761-775.
  2. Michael D. Hurd & Kathleen McGarry, 1997. "The Predictive Validity of Subjective Probabilities of Survival," NBER Working Papers 6193, National Bureau of Economic Research, Inc.
  3. Smith, V. Kerry & Taylor, Donald H., Jr. & Sloan, Frank A., 2000. "Longevity Expectations and Death: Can People Predict Their Own Demise?," Working Papers 00-15, Duke University, Department of Economics.
  4. Crossley, Thomas F. & Kennedy, Steven, 2002. "The reliability of self-assessed health status," Journal of Health Economics, Elsevier, vol. 21(4), pages 643-658, July.
  5. Maria Perozek, 2008. "Using subjective expectations to forecast longevity: do survey respondents know something we don’t know?," Demography, Springer, vol. 45(1), pages 95-113, February.
  6. Charles F. Manski, 2004. "Measuring Expectations," Econometrica, Econometric Society, vol. 72(5), pages 1329-1376, 09.
  7. Sendhil Mullainathan & Marianne Bertrand, 2001. "Do People Mean What They Say? Implications for Subjective Survey Data," American Economic Review, American Economic Association, vol. 91(2), pages 67-72, May.
  8. Daniel S. Hamermesh, 1985. "Expectations, Life Expectancy, and Economic Behavior," NBER Working Papers 0835, National Bureau of Economic Research, Inc.
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Cited by:
  1. Groneck, Max & Ludwig, Alexander & Zimper, Alexander, 2013. "A Life-Cycle Model with Ambiguous Survival Beliefs," MEA discussion paper series 13270, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
  2. Amalia Di Girolamo & Glenn W. Harrison & Morten I. Lau & J. Todd Swarthout, 2013. "Characterizing Financial and Statistical Literacy," Experimental Economics Center Working Paper Series 2013-04, Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University.

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