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Subjective mortality expectations and consumption and saving behaviours among the elderly

Author

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  • Martin Salm

Abstract

Life expectancy is an important factor that individuals have to take into account for saving and consumption choices. The life-cycle model of consumption and saving behaviour predicts that consumption growth should decrease with higher mortality rates. The aim of this study is to test this hypothesis based on data about subjective longevity expectations from the Health and Retirement Study merged with detailed consumption data from two waves of the Consumption and Activities Mail Survey. This study finds that an increase in subjective mortality by 1% corresponds to an annual decrease in consumption of non-durable goods of around 1.8%.

Suggested Citation

  • Martin Salm, 2010. "Subjective mortality expectations and consumption and saving behaviours among the elderly," Canadian Journal of Economics, Canadian Economics Association, vol. 43(3), pages 1040-1057, August.
  • Handle: RePEc:cje:issued:v:43:y:2010:i:3:p:1040-1057
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    Citations

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    Cited by:

    1. Biró Anikó, 2016. "Differences between Subjective and Predicted Survival Probabilities and Their Relation to Preventive Care Use," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 16(2), pages 807-835, April.
    2. Anikó Bíró, 2013. "Subjective mortality hazard shocks and the adjustment of consumption expenditures," Journal of Population Economics, Springer;European Society for Population Economics, vol. 26(4), pages 1379-1408, October.
    3. Binswanger, Johannes & Salm, Martin, 2013. "Does Everyone Use Probabilities? Intuitive and Rational Decisions about Stockholding," IZA Discussion Papers 7265, Institute for the Study of Labor (IZA).
    4. Spaenjers, Christophe & Spira, Sven Michael, 2015. "Subjective life horizon and portfolio choice," Journal of Economic Behavior & Organization, Elsevier, vol. 116(C), pages 94-106.
    5. Groneck, Max & Ludwig, Alexander & Zimper, Alexander, 2016. "A life-cycle model with ambiguous survival beliefs," Journal of Economic Theory, Elsevier, vol. 162(C), pages 137-180.
    6. David R. Rappange & Werner B. F. Brouwer & Job van Exel, 2016. "A long life in good health: subjective expectations regarding length and future health-related quality of life," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 17(5), pages 577-589, June.
    7. Thornton, Rebecca L., 2012. "HIV testing, subjective beliefs and economic behavior," Journal of Development Economics, Elsevier, vol. 99(2), pages 300-313.
    8. Wu, Shang & Stevens, Ralph & Thorp, Susan, 2015. "Cohort and target age effects on subjective survival probabilities: Implications for models of the retirement phase," Journal of Economic Dynamics and Control, Elsevier, vol. 55(C), pages 39-56.
    9. repec:kap:decono:v:165:y:2017:i:3:d:10.1007_s10645-017-9301-z is not listed on IDEAS
    10. Grevenbrock, Nils & Groneck, Max & Ludwig, Alexander & Zimper, Alexander, 2015. "Biased Survival Beliefs, Psychological and Cognitive Explanations, and the Demand for Life Insurances," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113203, Verein für Socialpolitik / German Economic Association.
    11. Groneck, Max & Ludwig, Alexander & Zimper, Alexander, 2016. "A life-cycle model with ambiguous survival beliefs," Journal of Economic Theory, Elsevier, vol. 162(C), pages 137-180.
    12. Timothy Riffe & Pil H. Chung & Jeroen Spijker & John MacInnes, 2015. "Time-to-death patterns in markers of age and dependency," MPIDR Working Papers WP-2015-003, Max Planck Institute for Demographic Research, Rostock, Germany.
    13. Andersen, Torben M. & Bhattacharya, Joydeep, 2013. "Unfunded Pensions And Endogenous Labor Supply," Macroeconomic Dynamics, Cambridge University Press, vol. 17(05), pages 971-997, July.
    14. Bissonnette, Luc & Hurd, Michael D. & Michaud, Pierre-Carl, 2014. "Individual Survival Curves Comparing Subjective and Observed Mortality Risks," IZA Discussion Papers 8658, Institute for the Study of Labor (IZA).
    15. repec:spr:eurpop:v:33:y:2017:i:4:d:10.1007_s10680-017-9411-y is not listed on IDEAS
    16. Sanders, E.A.T., 2011. "Annuity market imperfections," Other publications TiSEM 227f9684-ccba-4646-99bc-3, Tilburg University, School of Economics and Management.
    17. Post, Thomas & Hanewald, Katja, 2013. "Longevity risk, subjective survival expectations, and individual saving behavior," Journal of Economic Behavior & Organization, Elsevier, vol. 86(C), pages 200-220.

    More about this item

    JEL classification:

    • 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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