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Fear of ruin and longevity enhancing investment

Author

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  • EECKHOUDT, Louis

    (---)

  • PESTIEAU, Pierre

    (Université catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE))

Abstract

Rectangularization of the survival probability seems to be an ongoing process. It results from a higher concentration of the ages at death; but it can be reversed by a continuous increase in the limit of life time. In this paper, we assume that these two factors are endogenous and we show that risk averse decision makers exhibit a bias towards rectangularization. More specifically, the importance of the bias depends upon the intensity of the "fear of ruin" which is another measure of the degree of absolute risk aversion.

Suggested Citation

  • EECKHOUDT, Louis & PESTIEAU, Pierre, 2007. "Fear of ruin and longevity enhancing investment," CORE Discussion Papers 2007032, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvco:2007032
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    File URL: http://www.uclouvain.be/cps/ucl/doc/core/documents/coredp2007_32.pdf
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    Citations

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    Cited by:

    1. Pierre Pestieau & Grégory Ponthière, 2012. "The public economics of increasing longevity," Working Papers halshs-00676492, HAL.
    2. Gregory Ponthiere, 2010. "Unequal Longevities and Lifestyles Transmission," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 12(1), pages 93-126, February.
    3. Marie-Louise Leroux, 2011. "Endogenous differential mortality, non-contractible effort and non-linear taxation," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 18(1), pages 56-73, February.
    4. LEROUX, Marie-Louise & PESTIEAU, Pierre & PONTHIÈRE, Grégory, 2008. "Should we subsidize longevity?," CORE Discussion Papers 2008058, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    5. Grégory Ponthière, 2008. "Unequal longevities and lifestyles transmission," Working Papers halshs-00586010, HAL.
    6. Marie-Louise Leroux & Pierre Pestieau & Gregory Ponthiere, 2011. "Optimal linear taxation under endogenous longevity," Journal of Population Economics, Springer;European Society for Population Economics, vol. 24(1), pages 213-237, January.
    7. Pierre Pestieau & Gregory Ponthiere & Motohiro Sato, 2008. "Longevity, Health Spending, and Pay-as-you-Go Pensions," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 64(1), pages 1-18, March.
    8. Pierre Pestieau & Gregory Ponthiere, 2012. "The Public Economics of Increasing Longevity," Hacienda Pública Española, IEF, vol. 200(1), pages 41-74, March.
    9. Pierre Pestieau & Grégory Ponthiere, 2012. "On the Policy Implications of Changing Longevity," CESifo Working Paper Series 3926, CESifo Group Munich.
    10. Marie-Louise Leroux & Pierre Pestieau & Grégory Ponthière, 2008. "Optimal linear taxation under endogenous longevity," Working Papers halshs-00586241, HAL.
    11. Marie-Louise Leroux & Pierre Pestieau & Grégory Ponthière, 2008. "Should we subsidize longevity?," Working Papers halshs-00586236, HAL.

    More about this item

    Keywords

    longevity; fear of ruin;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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