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Subjective Mortality Risk and Bequests

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  • Li Gan
  • Guan Gong
  • Michael Hurd
  • Daniel McFadden

Abstract

This paper investigates whether subjective expectations about future mortality affect consumption and bequests motives. We estimate a dynamic life-cycle model based on subjective survival rates and wealth from the panel dataset Asset and Health Dynamics among Oldest Old. We find that bequest motives are small on average, which indicates that most bequests are involuntary or accidental. Moreover, parameter estimates using subjective mortality risk perform better in predicting out-of-sample wealth levels than estimates using life table mortality risks, suggesting that decisions about consumption and saving are influenced more strongly by individual-level beliefs about mortality risk than by group level mortality risk.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10789.

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Date of creation: Sep 2004
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Handle: RePEc:nbr:nberwo:10789

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  1. Bernheim, B Douglas & Shleifer, Andrei & Summers, Lawrence H, 1986. "The Strategic Bequest Motive," Journal of Labor Economics, University of Chicago Press, vol. 4(3), pages S151-82, July.
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  3. Daniel S. Hamermesh, 1982. "Expectations, Life Expectancy, and Economic Behavior," NBER Working Papers 0835, National Bureau of Economic Research, Inc.
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  6. Steven F. Venti & David A. Wise, 2001. "Aging and Housing Equity: Another Look," NBER Working Papers 8608, National Bureau of Economic Research, Inc.
  7. Kotlikoff, Laurence J & Summers, Lawrence H, 1981. "The Role of Intergenerational Transfers in Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 706-32, August.
  8. David A. Wise, 2004. "Perspectives on the Economics of Aging," NBER Books, National Bureau of Economic Research, Inc, number wise04-1, May.
  9. Michael D. Hurd & Kathleen McGarry, 1997. "The Predictive Validity of Subjective Probabilities of Survival," NBER Working Papers 6193, National Bureau of Economic Research, Inc.
  10. F. Thomas Juster & James P. Smith, 2004. "Improving the Quality of Economic Data: Lessons from the HRS and AHEAD," Labor and Demography 0402010, EconWPA.
  11. Hurd, Michael D, 1989. "Mortality Risk and Bequests," Econometrica, Econometric Society, vol. 57(4), pages 779-813, July.
  12. Hamermesh, Daniel S & Menchik, Paul L, 1987. "Planned and Unplanned Bequests," Economic Inquiry, Western Economic Association International, vol. 25(1), pages 55-66, January.
  13. Harish Chand & Li Gan, 2003. "The Effects of Bracketing in Wealth Estimation," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 49(2), pages 273-287, 06.
  14. Kocherlakota, Narayana R., 1990. "On the 'discount' factor in growth economies," Journal of Monetary Economics, Elsevier, vol. 25(1), pages 43-47, January.
  15. Wise, David A. (ed.), 1998. "Inquiries in the Economics of Aging," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226903033.
  16. Li Gan & Michael Hurd & Daniel McFadden, 2003. "Individual Subjective Survival Curves," NBER Working Papers 9480, National Bureau of Economic Research, Inc.
  17. Adams, Peter & Hurd, Michael D. & McFadden, Daniel & Merrill, Angela & Ribeiro, Tiago, 2003. "Healthy, wealthy, and wise? Tests for direct causal paths between health and socioeconomic status," Journal of Econometrics, Elsevier, vol. 112(1), pages 3-56, January.
  18. David A. Wise, 2004. "Introduction to "Perspectives on the Economics of Aging"," NBER Chapters, in: Perspectives on the Economics of Aging, pages 1-16 National Bureau of Economic Research, Inc.
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