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Evidence on Individual Preferences for Longevity Risks

Author

Listed:
  • Gaëtan DELPRAT
  • Marie-Louise LEROUX
  • Pierre-Carl MICHAUX

Abstract

The standard model of intertemporal choice assumes risk neutrality towards the length of life: under additivity of lifetime utility and expected utility assumptions, agents are not sensitive to a mean preserving spread in the length of life. Using a survey fielded in the RAND American Life Panel, this paper provides empirical evidence on possible deviation from risk neutrality with respect to longevity in the US population. The questions we ask allow to find the distribution as well as to quantify the degree of risk aversion with respect to the length of life in the population. We find evidence that roughly 75% of respondents were not neutral with respect to longevity risk. Hence, there is a little empirical support for the joint use of the expected utility and additive lifetime utility assumptions in life-cycle models. Higher income households are more likely to be risk averse towards the length of life. We do not find evidence that the degree of risk aversion varies with age or education.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Gaëtan DELPRAT & Marie-Louise LEROUX & Pierre-Carl MICHAUX, 2016. "Evidence on Individual Preferences for Longevity Risks," LIDAM Reprints CORE 2754, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvrp:2754
    Note: In : Journal of Pension Economics and Finance, 15(2), 160-179, 2016
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    1. Antoine Bommier, Francois Le Grand, "undated". "Too Risk Averse to Purchase Insurance? A Theoretical Glance at the Annuity Puzzle," Working Papers ETH-RC-12-002, ETH Zurich, Chair of Systems Design.
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    2. Attema, Arthur & Frasch, Jona & L'Haridon, Olivier, 2020. "Multivariate risk preferences in the QALY model," MPRA Paper 103339, University Library of Munich, Germany.
    3. Shaun Da Costa & Owen O'Donnell & Raf Van Gestel, 2023. "Distributionally Sensitive Measurement and Valuation of Population Health," Tinbergen Institute Discussion Papers 23-017/V, Tinbergen Institute.
    4. Marie-Louise Leroux & Pierre Pestieau & Grégory Ponthière, 2015. "Longévité différentielle et redistribution : enjeux théoriques et empiriques," CIRANO Working Papers 2015s-06, CIRANO.
    5. Leroux, Marie-Louise & Pestieau, Pierre & Ponthière, Grégory, 2015. "Longévité différentielle et redistribution : enjeux théoriques et empiriques," L'Actualité Economique, Société Canadienne de Science Economique, vol. 91(4), pages 465-497, Décembre.
    6. James Hammitt & Tuba Tunçel, 2015. "Preferences for life-expectancy gains: Sooner or later?," Journal of Risk and Uncertainty, Springer, vol. 51(1), pages 79-101, August.
    7. ONDER Harun & PESTIEAU Pierre & PONTHIERE Gregory, 2017. "The domestic welfare loss of Syrian civil war: an equivalent income approach," LIDAM Discussion Papers CORE 2017025, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    8. James K. Hammitt & Tuba Tunçel, 2023. "Monetary values of increasing life expectancy: Sensitivity to shifts of the survival curve," Journal of Risk and Uncertainty, Springer, vol. 67(3), pages 239-269, December.
    9. Brigitte Dormont & Anne-Laure Samson & Marc Fleurbaey & Stéphane Luchini & Erik Schokkaert, 2018. "Individual Uncertainty About Longevity," Demography, Springer;Population Association of America (PAA), vol. 55(5), pages 1829-1854, October.
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    11. Arthur E. Attema & Jona J. Frasch & Olivier L’Haridon, 2022. "Multivariate risk preferences in the quality‐adjusted life year model," Health Economics, John Wiley & Sons, Ltd., vol. 31(2), pages 382-398, February.

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    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • I10 - Health, Education, and Welfare - - Health - - - General
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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