Biased Risk Perceptions of Longevity and Disability in Old Age
AbstractRational learning theories postulate that information channels and cognitive biases such as individual optimism may influence an individuals assessment of the risk of undesired events, especially with regard to those that have a cumulative nature. This is the case with disability in old age, which may take place upon survival to an advanced age, and such factors have been regarded as responsible for certain individual behaviours (for example, the limited incidence of insurance purchase). This paper examines the determinants of individual perceptions with regard to disability in old age and longevity. The cumulative nature of such perceptions of risk is tested, and potential biases are identified, including optimism and a set of information determinants. Empirical evidence from a representative survey of Catalonia is presented to illustrate these effects. The findings from this research suggest a significant overestimation of disability in old age, yet this is not the case with longevity. Furthermore, individual perceptions with regard to disability in old age, unlike those with regard to longevity, exhibit on aggregate an optimistic bias and, are perceived as cumulative risks. Gender influences the perceived risk of disability in old age at a population level but not at the individual level, and the opposite holds true for age. Finally, self-reported health status is the main variable behind risk perceptions at both the individual and population level.
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Bibliographic InfoPaper provided by Universitat de Barcelona. Espai de Recerca en Economia in its series Working Papers in Economics with number 174.
Length: 32 pages
Date of creation: 2007
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Find related papers by JEL classification:
- I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- I12 - Health, Education, and Welfare - - Health - - - Health Production
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-04-09 (All new papers)
- NEP-CBE-2007-04-09 (Cognitive & Behavioural Economics)
- NEP-HEA-2007-04-09 (Health Economics)
- NEP-LTV-2007-04-09 (Unemployment, Inequality & Poverty)
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NBER Working Papers
9480, National Bureau of Economic Research, Inc.
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