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The Predictive Validity of Subjective Mortality Expectations: Evidence From the Health and Retirement Study

  • Todd Elder

    ()

Several recent studies suggest that individual subjective survival forecasts are powerful predictors of both mortality and behavior. Using 15 years of longitudinal data from the Health and Retirement Study, I present an alternative view. Across a wide range of ages, predictions of in-sample mortality rates based on subjective forecasts are substantially less accurate than predictions based on population life tables. Subjective forecasts also fail to capture fundamental properties of senescence, including increases in yearly mortality rates with age. To shed light on the mechanisms underlying these biases, I develop and estimate a latent-factor model of how individuals form subjective forecasts. The estimates of this model’s parameters imply that these forecasts incorporate several important sources of measurement error that arguably swamp the useful information they convey. Copyright Population Association of America 2013

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File URL: http://hdl.handle.net/10.1007/s13524-012-0164-2
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Article provided by Springer in its journal Demography.

Volume (Year): 50 (2013)
Issue (Month): 2 (April)
Pages: 569-589

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Handle: RePEc:spr:demogr:v:50:y:2013:i:2:p:569-589
Contact details of provider: Web page: http://www.springer.com/economics/journal/13524

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  1. Maria Perozek, 2008. "Using subjective expectations to forecast longevity: do survey respondents know something we don’t know?," Demography, Springer, vol. 45(1), pages 95-113, February.
  2. Michael D. Hurd & James P. Smith & Julie M. Zissimopoulos, 2004. "The effects of subjective survival on retirement and Social Security claiming," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(6), pages 761-775.
  3. Smith, V. Kerry & Taylor, Donald H., Jr. & Sloan, Frank A., 2000. "Longevity Expectations and Death: Can People Predict Their Own Demise?," Working Papers 00-15, Duke University, Department of Economics.
  4. Daniel S. Hamermesh, 1982. "Expectations, Life Expectancy, and Economic Behavior," NBER Working Papers 0835, National Bureau of Economic Research, Inc.
  5. Sendhil Mullainathan & Marianne Bertrand, 2001. "Do People Mean What They Say? Implications for Subjective Survey Data," American Economic Review, American Economic Association, vol. 91(2), pages 67-72, May.
  6. Michael D. Hurd & Kathleen McGarry, 1997. "The Predictive Validity of Subjective Probabilities of Survival," NBER Working Papers 6193, National Bureau of Economic Research, Inc.
  7. Charles F. Manski, 2004. "Measuring Expectations," Econometrica, Econometric Society, vol. 72(5), pages 1329-1376, 09.
  8. Crossley, Thomas F. & Kennedy, Steven, 2002. "The reliability of self-assessed health status," Journal of Health Economics, Elsevier, vol. 21(4), pages 643-658, July.
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