This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

A Parsimonious Model of Subjective Life Expectancy

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Ludwig, Alexander () (Mannheim Research Institute for the Economics of Aging (MEA) and Sonderforschungsbereich 504)
Zimper, Alexander () (Sonderforschungsbereich 504)

Additional information is available for the following registered author(s):

Abstract

This paper develops a theoretical model for the formation of subjective beliefs on individual survival expectations. Data from the Health and Retirement Study (HRS) indicate that, on average, young respondents underestimate their true survival probability whereas old respondents overestimate their survival probability. Such subjective beliefs violate the rational expectations paradigm and are also not in line with the predictions of the rational Bayesian learning paradigm. We therefore introduce a model of Bayesian learning which combines rational learning with the possibility that the interpretation of new information is prone to psychological attitudes. We estimate the parameters of our theoretical model by pooling the HRS data. Despite a parsimonious parametrization we find that our model results in a remarkable fit to the average subjective beliefs expressed in the data.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.sfb504.uni-mannheim.de/publications/dp07-65.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim in its series Sonderforschungsbereich 504 Publications with number 07-65.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 33 pages
Date of creation: 07 Nov 2007
Date of revision:
Handle: RePEc:xrs:sfbmaa:07-65

Note: We thank Axel Börsch-Supan, Andrew Caplin, Mike Hurd, Jürgen Maurer, Susan Rohwedder,
Contact details of provider:
Postal: D-68131 Mannheim
Phone: (49) (0) 621-292-2547
Fax: (49) (0) 621-292-5594
Email:
Web page: http://www.sfb504.uni-mannheim.de/
More information through EDIRC

Web page: http://www.sfb504.uni-mannheim.de

Order Information:
Email:

For technical questions regarding this item, or to correct its listing, contact: (Carsten Schmidt).

Related research
Keywords:

Other versions of this item:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Gilboa Itzhak & Schmeidler David, 1993. "Updating Ambiguous Beliefs," Journal of Economic Theory, Elsevier, vol. 59(1), pages 33-49, February. [Downloadable!] (restricted)
    Other versions:
  2. Chateauneuf, Alain & Eichberger, Jürgen & Grant, Simon, 2003. "Choice under Uncertainty with the Best and Worst in Mind: Neo-additive Capacities," Sonderforschungsbereich 504 Publications 03-10, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim. [Downloadable!]
    Other versions:
  3. Wakker, Peter P, 2001. "Testing and Characterizing Properties of Nonadditive Measures through Violations of the Sure-Thing Principle," Econometrica, Econometric Society, vol. 69(4), pages 1039-59, July.
  4. V. Kerry Smith & Donald H. Taylor Jr. & Frank A. Sloan, 2001. "Longevity Expectations and Death: Can People Predict Their Own Demise?," American Economic Review, American Economic Association, vol. 91(4), pages 1126-1134, September. [Downloadable!] (restricted)
    Other versions:
  5. Li Gan & Michael Hurd & Daniel McFadden, 2003. "Individual Subjective Survival Curves," NBER Working Papers 9480, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  6. Viscusi, W Kip, 1991. "Age Variations in Risk Perceptions and Smoking Decisions," The Review of Economics and Statistics, MIT Press, vol. 73(4), pages 577-88, November. [Downloadable!] (restricted)
  7. Schmeidler, David, 1989. "Subjective Probability and Expected Utility without Additivity," Econometrica, Econometric Society, vol. 57(3), pages 571-87, May. [Downloadable!] (restricted)
  8. Ghirardato, Paolo & Marinacci, Massimo, 2002. "Ambiguity Made Precise: A Comparative Foundation," Journal of Economic Theory, Elsevier, vol. 102(2), pages 251-289, February. [Downloadable!] (restricted)
  9. Charles F. Manski, 2004. "Measuring Expectations," Econometrica, Econometric Society, vol. 72(5), pages 1329-1376, 09. [Downloadable!] (restricted)
  10. Tonks, Ian, 1983. "Bayesian Learning and the Optimal Investment Decision of the Firm," Economic Journal, Royal Economic Society, vol. 93(369a), pages 87-98, Supplemen. [Downloadable!] (restricted)
    Other versions:
  11. Marciano Siniscalchi, 2001. "Bayesian Updating for General Maxmin Expected Utility Preferences," Discussion Papers 1366, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
  12. Epstein, Larry G, 1999. "A Definition of Uncertainty Aversion," Review of Economic Studies, Blackwell Publishing, vol. 66(3), pages 579-608, July. [Downloadable!] (restricted)
  13. Cesaltina Pacheco Pires, 2002. "A Rule For Updating Ambiguous Beliefs," Theory and Decision, Springer, vol. 53(2), pages 137-152, September. [Downloadable!] (restricted)
  14. Eichberger, J. & Kelsey, D., 1996. "E-Capacities and the Ellsberg Paradox," Discussion Papers 96-13, Department of Economics, University of Birmingham.
  15. Viscusi, W Kip, 1990. "Do Smokers Underestimate Risks?," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1253-69, December. [Downloadable!] (restricted)
  16. V. Kerry Smith & Donald H. Taylor & Frank A. Sloan & F. Reed Johnson & William H. Desvousges, 2001. "Do Smokers Respond To Health Shocks?," The Review of Economics and Statistics, MIT Press, vol. 83(4), pages 675-687, November. [Downloadable!] (restricted)
    Other versions:
  17. Marciano Siniscalchi, 2006. "Dynamic Choice Under Ambiguity," Discussion Papers 1430, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
  18. Viscusi, W. Kip, 1985. "A Bayesian perspective on biases in risk perception," Economics Letters, Elsevier, vol. 17(1-2), pages 59-62. [Downloadable!] (restricted)
Full references

Statistics
Access and download statistics

Did you know? The RePEc project started in 1997. Its precursor, NetEc, dates back to 1993.

This page was last updated on 2009-11-16.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.