Correcting Focal Point Biases in Subjective Health Expectations: An Application to the RAND-HRS Data
AbstractSubjective health expectations are derived using the RAND-HRS dataset. We use a Bayesian updating mechanism to correct for focal point responses and reporting errors of the original health expectations variable. We then test the quality of the health expectations measure and describe its correlation with various health indicators and other individual characteristics. Our results indicate that subjective health expectations do contain additional information that is not incorporated in subjective mortality expectations and that the rational expectations assumption cannot be rejected for subjective health expectations. Finally, the data suggest that individuals younger than 70 years of age seem to be more pessimistic about their health than individuals in their 70's.
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Bibliographic InfoPaper provided by Towson University, Department of Economics in its series Working Papers with number 2010-08.
Length: 29 pages
Date of creation: Mar 2010
Date of revision: Mar 2010
Subjective Health Expectations; Rational Health Expectations; Work Limiting Health Problems; Bayesian Updating of Expectations.;
Find related papers by JEL classification:
- I10 - Health, Education, and Welfare - - Health - - - General
- D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
- C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
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