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Subjective Morality Risks and Bequests

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  • Li Gan
  • Guan Gong

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    (Economics University of Texas Austin)

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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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Paper provided by Society for Economic Dynamics in its series 2005 Meeting Papers with number 900.

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Date of creation: 2005
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Handle: RePEc:red:sed005:900

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  1. Susann Rohwedder & Steven J. Haider & Michael D. Hurd, 2004. "Increases in Wealth Among the Elderly in the Early 1990s: How Much is Due to Survey Design?," Working Papers 195, RAND Corporation Publications Department.
  2. Li Gan & Michael D. Hurd & Daniel L. McFadden, 2005. "Individual Subjective Survival Curves," NBER Chapters, in: Analyses in the Economics of Aging, pages 377-412 National Bureau of Economic Research, Inc.
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  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. 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.
  15. Michael D. Hurd & Kathleen McGarry, 2002. "The Predictive Validity of Subjective Probabilities of Survival," Economic Journal, Royal Economic Society, vol. 112(482), pages 966-985, October.
  16. Hurd, Michael D, 1989. "Mortality Risk and Bequests," Econometrica, Econometric Society, vol. 57(4), pages 779-813, July.
  17. James M. Poterba, 1997. "The History of Annuities in the United States," NBER Working Papers 6001, National Bureau of Economic Research, Inc.
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