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Reporting expected longevity and smoking: evidence from the SHARE

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  • Silvia Balia

Abstract

This paper investigates formation of expected longevity in an elderly popu- lation. We use Italian data from the early (2004) release of the Survey of Health, Ageing and Retirement in Europe (SHARE). The SHARE provides a numerical measure for subjective survival probability (SSP). To assess inter- nal consistency and investigate validity of SSP as a proxy of actual mortality, we compare SSP to lifetables and look at the variation with health, smok- ing and socio-economic variables. In a multivariate framework, we propose a recursive model for expected longevity, self-assessed health and smoking duration, where health and smoking variables are potentially endogenous. Unobservable individual-speci¯c heterogeneity is considered by estimating a finite mixture model via the EM algorithm, which allows division of the popu- lation according to different latent classes and estimation of class membership probabilities. Our mixture model fits the data better than the single class model and provides evidence of individual unobserved heterogeneity in the formulation of survival expectations. Expectations are shown to vary most with health status, socio-economic characteristics, parental mortality and age. Two-types of individuals in the population are identified, that differ in terms of unobservable frailty and rationality in addiction. We also find differences between current and former smokers in the way they discount future conse- quences of tobacco consumption on health and mortality risk. Our findings suggest caution in the use of SSP as a proxy of actual mortality.

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Bibliographic Info

Paper provided by HEDG, c/o Department of Economics, University of York in its series Health, Econometrics and Data Group (HEDG) Working Papers with number 07/10.

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Date of creation: Jul 2007
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Handle: RePEc:yor:hectdg:07/10

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Postal: HEDG/HERC, Department of Economics and Related Studies, University of York, York, YO10 5DD, United Kingdom
Phone: (0)1904 323776
Fax: (0)1904 323759
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Web page: http://www.york.ac.uk/economics/postgrad/herc/hedg/
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Keywords: subjective survival probability; smoking; beta regression; duration analysis; unobservable heterogeneity; mixture model; EM algorithm.;

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References

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Cited by:
  1. Franco Peracchi & Valeria Perotti, 2010. "Subjective survival probabilities and life tables: Evidence from Europe," EIEF Working Papers Series 1016, Einaudi Institute for Economics and Finance (EIEF), revised Nov 2011.

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