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Denial of Death and Economic Behavior

Author

Listed:
  • Kopczuk Wojciech

    () (Columbia University)

  • Slemrod Joel

    () (University of Michigan)

Abstract

We model denial of death and its effect on economic behavior. Attempts to reduce death anxiety and the possibility of denial of mortality-relevant information interact with intertemporal choices and may lead to time-inconsistent behavior and other behavioral phenomena. In the model, repression of signals of mortality leads to underconsumption for unsophisticated individuals, but forward-sophisticated individuals may over-consume in anticipation of future denial and may seek ways to commit to act according to ones mortality prospects as currently perceived. We show that the mere possibility of engaging in this kind of denial leads to time-inconsistent but efficient behavior. Refusal to face up to the reality of death may help explain a wide range of empirical phenomena, including the underutilization of tax-advanced inter vivos gifts and inadequate purchase of life insurance.

Suggested Citation

  • Kopczuk Wojciech & Slemrod Joel, 2005. "Denial of Death and Economic Behavior," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 5(1), pages 1-26, August.
  • Handle: RePEc:bpj:bejtec:v:advances.5:y:2005:i:1:n:5
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    References listed on IDEAS

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    Cited by:

    1. Alexander Zimper & Alexander Ludwig & Max Groneck, 2012. "A Life-Cycle Consumption Model with Ambiguous Survival Beliefs," 2012 Meeting Papers 693, Society for Economic Dynamics.
    2. Karen Pittel & Dirk Rübbelke, 2011. "Characteristics of Terrorism," Chapters,in: Handbook on the Economics of Conflict, chapter 7 Edward Elgar Publishing.
    3. Pierre Pestieau & Grégory Ponthière, 2010. "Long term care insurance puzzle," Working Papers halshs-00564862, HAL.
    4. Marta Melguizo Garde, 2007. "La motivación de las transmisiones lucrativas entre generaciones de una familia: modelos teóricos y evidencia empírica," Hacienda Pública Española, IEF, vol. 181(2), pages 81-118, June.
    5. Wojciech Kopczuk, 2007. "Bequest and Tax Planning: Evidence from Estate Tax Returns," The Quarterly Journal of Economics, Oxford University Press, vol. 122(4), pages 1801-1854.
    6. José Mª Durán Cabré & Alejandro Esteller Moré, 2007. "An empirical analysis of wealth taxation: Equity vs. tax compliance," Working Papers 2007/1, Institut d'Economia de Barcelona (IEB).
    7. Harris, Timothy & Yelowitz, Aaron, 2015. "Racial Disparities in Life Insurance Coverage," MPRA Paper 64005, University Library of Munich, Germany.
    8. repec:eee:jeborg:v:148:y:2018:i:c:p:34-45 is not listed on IDEAS
    9. PESTIEAU, Pierre & PONTHIERE, Gregory, 2016. "The Public Economics of Long Term Care," CORE Discussion Papers 2016008, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    10. Bruno Frey & Alois Stutzer, 2005. "Happiness Research: State and Prospects," Review of Social Economy, Taylor & Francis Journals, vol. 63(2), pages 207-228.
    11. Roland Bénabou & Jean Tirole, 2006. "Belief in a Just World and Redistributive Politics," The Quarterly Journal of Economics, Oxford University Press, vol. 121(2), pages 699-746.
    12. Christian Gollier & Alexander Muermann, 2010. "Optimal Choice and Beliefs with Ex Ante Savoring and Ex Post Disappointment," Management Science, INFORMS, vol. 56(8), pages 1272-1284, August.
    13. Dumas, Jean-Malik, 2016. "Essays in behavioral strategy," Other publications TiSEM a04c1b1b-eeed-48ad-894b-7, Tilburg University, School of Economics and Management.
    14. GOLLIER Christian & MUERMANN Alexander, 2006. "Optimal choice and beliefs with ex ante savoring ex post disappointment," LERNA Working Papers 06.18.211, LERNA, University of Toulouse.
    15. Gahramanov, Emin, 2013. "Survival misperception, time inconsistency, and implications for life-cycle saving and welfare," Economic Modelling, Elsevier, vol. 32(C), pages 539-550.
    16. Patrick Meyer & Grégory Ponthière, 2016. "Human Lifetime Entropy in a Historical Perspective (1750-2014)," PSE Working Papers halshs-01409679, HAL.
    17. Roland Bénabou & Jean Tirole, 2007. "Identity, Dignity and Taboos: Beliefs as Assets," Carlo Alberto Notebooks 50, Collegio Carlo Alberto.
    18. repec:eee:jhouse:v:38:y:2017:i:c:p:25-37 is not listed on IDEAS
    19. Matthias Wrede, 2005. "Health Values, Preference Inconsistency, and Insurance Demand," CESifo Working Paper Series 1634, CESifo Group Munich.
    20. CREMER, Helmuth & PESTIEAU, Pierre & PONTHIERE, Grégory, 2012. "The economics of long-term care: a survey," CORE Discussion Papers 2012030, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    21. Dillingh, Rik, 2016. "Empirical essays on behavioral economics and lifecycle decisions," Other publications TiSEM 0e2143e3-bd86-4302-90eb-e, Tilburg University, School of Economics and Management.
    22. Gottlieb, Daniel, 2014. "Imperfect memory and choice under risk," Games and Economic Behavior, Elsevier, vol. 85(C), pages 127-158.
    23. Erixson, Oscar, 2014. "Health Responses to a Wealth Shock: Evidence from a Swedish Tax Reform," Working Paper Series 1011, Research Institute of Industrial Economics.
    24. Harris, Timothy & Yelowitz, Aaron, 2015. "Nudging Life Insurance Holdings in the Workplace," MPRA Paper 67150, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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