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Mortality beliefs distorted: Magnifying the risk of dying young

Author

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  • Peter Jarnebrant

    (ESMT European School of Management and Technology)

  • Kristian Ove R. Myrseth

    (ESMT European School of Management and Technology)

Abstract

We explore mortality beliefs by eliciting individual-level belief distributions for participants’ remaining lifespan. Across two independent samples, from Germany and the USA, we find that individuals—while accurately forecasting their life expectancy—substantially overestimate the likelihood of dying young (younger than 50 years) and overestimate the likelihood of reaching very old age (older than 100 years). In other words, the modes of the belief distributions are relatively accurate, but the tails of the belief distributions are significantly ‘fatter’ than the corresponding tails of distributions obtained from demographic data. Our results are robust to variations in belief elicitation techniques, and to assumptions underlying normative longevity forecasts. The results have implications for a range of questions of economic behavior—including intertemporal choice, consumption smoothing, saving, and risk management.

Suggested Citation

  • Peter Jarnebrant & Kristian Ove R. Myrseth, 2013. "Mortality beliefs distorted: Magnifying the risk of dying young," ESMT Research Working Papers ESMT-13-03, ESMT European School of Management and Technology.
  • Handle: RePEc:esm:wpaper:esmt-13-03
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    File URL: http://static.esmt.org/publications/workingpapers/ESMT-13-03.pdf
    File Function: First version, 2013
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    Cited by:

    1. Raphael Schoenle & Kristian Ove Myrseth & Rawley Heimer, 2016. "YOLO: Mortality Beliefs and Household Finance Puzzles," 2016 Meeting Papers 661, Society for Economic Dynamics.
    2. Rawley Z. Heimer & Kristian Ove R. Myrseth & Raphael S. Schoenle, 2015. "YOLO: Mortality Beliefs and Household Finance Puzzles," Working Papers 97, Brandeis University, Department of Economics and International Businesss School.

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    Keywords

    mortality; beliefs; risk perception; judgment;

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