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Using subjective expectations to forecast longevity: do survey respondents know something we don't know?

  • Maria G. Perozek
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    Future old-age mortality is notoriously difficult to predict because it requires not only an understanding of the process of senescence, which is influenced by genetic, environmental and behavioral factors, but also a prediction of how these factors will evolve going forward. In this paper, I argue that individuals are uniquely qualified to predict their own mortality based on their own genetic background, as well as environmental and behavioral risk factors that are often known only to the individual. Using expectations data from the 1992 HRS, I construct subjective cohort life tables that are shown to predict the unusual direction of revisions to U.S. life expectancy by gender between 1992 and 2004; that is, the SSA revised up male life expectancy in 2004 and at the same revised down female life expectancy, narrowing the gender gap in longevity by 25 percent over this period. Further, the subjective expectations of women suggest that female life expectancies produced by the Social Security Actuary might still be on the high side, while the subjective life expectancies for men appear to be roughly in line with the 2004 life tables.

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    Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Finance and Economics Discussion Series with number 2005-68.

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    Date of creation: 2005
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    Handle: RePEc:fip:fedgfe:2005-68
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    1. James W. Vaupel & Annette Baudisch & Martin Dölling & Deborah A. Roach & Jutta Gampe, 2004. "The case for negative senescence," MPIDR Working Papers WP-2004-002, Max Planck Institute for Demographic Research, Rostock, Germany.
    2. Michael D. Hurd & Kathleen McGarry, 1997. "The Predictive Validity of Subjective Probabilities of Survival," NBER Working Papers 6193, National Bureau of Economic Research, Inc.
    3. Li Gan & Michael Hurd & Daniel McFadden, 2003. "Individual Subjective Survival Curves," NBER Working Papers 9480, National Bureau of Economic Research, Inc.
    4. B. Douglas Bernheim, 1989. "The Timing of Retirement: A Comparison of Expectations and Realizations," NBER Chapters, in: The Economics of Aging, pages 335-358 National Bureau of Economic Research, Inc.
    5. Manski, C.F., 1989. "The Use Of Intentions Data To Predict Behaviour : A Best- Case Analysis," Working papers 8905, Wisconsin Madison - Social Systems.
    6. David M. Cutler & Ellen Meara, 2004. "Changes in the Age Distribution of Mortality over the Twentieth Century," NBER Chapters, in: Perspectives on the Economics of Aging, pages 333-366 National Bureau of Economic Research, Inc.
    7. James Vaupel & Hans Lundstrom, 1994. "Longer Life Expectancy? Evidence from Sweden of Reductions in Mortality Rates at Advanced Ages," NBER Chapters, in: Studies in the Economics of Aging, pages 79-102 National Bureau of Economic Research, Inc.
    8. Jeff Dominitz & Charles F. Manski, 1994. "Using Expectations Data to Study Subjective Income Expectations," Econometrics 9411003, EconWPA.
    9. Ronald Lee, 2003. "The Demographic Transition: Three Centuries of Fundamental Change," Journal of Economic Perspectives, American Economic Association, vol. 17(4), pages 167-190, Fall.
    10. William F. Bassett & Robin L. Lumsdaine, 2001. "Probability Limits: Are Subjective Assessments Adequately Accurate?," Journal of Human Resources, University of Wisconsin Press, vol. 36(2), pages 327-363.
    11. Hamermesh, Daniel S, 1985. "Expectations, Life Expectancy, and Economic Behavior," The Quarterly Journal of Economics, MIT Press, vol. 100(2), pages 389-408, May.
    12. B. Douglas Bernheim, 1988. "How Do the Elderly Form Expectations? An Analysis of Responses to New Information," NBER Working Papers 2719, National Bureau of Economic Research, Inc.
    13. Jeff Dominitz, 1998. "Earnings Expectations, Revisions, And Realizations," The Review of Economics and Statistics, MIT Press, vol. 80(3), pages 374-388, August.
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