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Evidence on Individual Preferences for Longevity Risk

Author

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  • Delprat, Gaëtan

    (University of Québec at Montréal)

  • Leroux, Marie-Louise

    (University of Québec at Montréal)

  • Michaud, Pierre-Carl

    (HEC Montreal)

Abstract

The standard model of intertemporal choice assumes risk neutrality toward the length of life: due to additivity, agents are not sensitive to a mean preserving spread in the length of life. Using a survey fielded in the RAND American Life Panel (ALP), this paper provides empirical evidence on possible deviation from risk neutrality with respect to longevity in the U.S. 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. Higher income households are more likely to be risk averse. We do not find evidence that the degree of risk aversion varies with age or education.

Suggested Citation

  • Delprat, Gaëtan & Leroux, Marie-Louise & Michaud, Pierre-Carl, 2013. "Evidence on Individual Preferences for Longevity Risk," IZA Discussion Papers 7317, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp7317
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    12. Antoine Bommier, 2006. "Uncertain Lifetime And Intertemporal Choice: Risk Aversion As A Rationale For Time Discounting," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(4), pages 1223-1246, November.
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    Cited by:

    1. Marie-Louise Leroux & Pierre Pestieau & Grégory Ponthière, 2015. "Longévité différentielle et redistribution : enjeux théoriques et empiriques," CIRANO Working Papers 2015s-06, CIRANO.
    2. 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.
    3. 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).
    4. 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.
    5. Bommier, Antoine & Schernberg, Hélène, 2021. "Would you prefer your retirement income to depend on your life expectancy?," Journal of Economic Theory, Elsevier, vol. 191(C).
    6. 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.
    7. 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.
    8. Da Costa, Shaun, 2023. "Estimating the welfare gains from anti-retroviral therapy in Sub-Saharan Africa," Journal of Health Economics, Elsevier, vol. 90(C).
    9. Attema, Arthur & Frasch, Jona & L'Haridon, Olivier, 2020. "Multivariate risk preferences in the QALY model," MPRA Paper 103339, University Library of Munich, Germany.
    10. 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.
    11. 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.

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    More about this item

    Keywords

    risk aversion toward the length of life; intertemporal choice; stated-preference;
    All these keywords.

    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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