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Mortality beliefs distorted: Magnifying the risk of dying young

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  • Peter Jarnebrant

    (ESMT European School of Management and Technology)

  • Kristian Ove R. Myrseth

    (ESMT European School of Management and Technology)

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    Abstract

    We explore mortality beliefs by eliciting individual-level belief distributions for participants’ remaining lifespan. Across two independent samples, from Germany and the USA, we find that individuals—while accurately forecasting their life expectancy—substantially overestimate the likelihood of dying young (younger than 50 years) and overestimate the likelihood of reaching very old age (older than 100 years). In other words, the modes of the belief distributions are relatively accurate, but the tails of the belief distributions are significantly ‘fatter’ than the corresponding tails of distributions obtained from demographic data. Our results are robust to variations in belief elicitation techniques, and to assumptions underlying normative longevity forecasts. The results have implications for a range of questions of economic behavior—including intertemporal choice, consumption smoothing, saving, and risk management.

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    File URL: http://static.esmt.org/publications/workingpapers/ESMT-13-03.pdf
    File Function: First version, 2013
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    Bibliographic Info

    Paper provided by ESMT European School of Management and Technology in its series ESMT Research Working Papers with number ESMT-13-03.

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    Length: 40 pages
    Date of creation: 28 Feb 2013
    Date of revision:
    Handle: RePEc:esm:wpaper:esmt-13-03

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    Keywords: mortality; beliefs; risk perception; judgment;

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