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Evidence on Individual Preferences for Longevity Risk

  • Delprat, Gaëtan

    ()

    (University of Québec at Montréal)

  • Leroux, Marie-Louise

    ()

    (University of Québec at Montréal)

  • Michaud, Pierre-Carl

    ()

    (University of Québec at Montréal)

The standard model of intertemporal choice assumes risk neutrality toward the length of life: due to additivity, agents are not sensitive to a mean preserving spread in the length of life. Using a survey fielded in the RAND American Life Panel (ALP), this paper provides empirical evidence on possible deviation from risk neutrality with respect to longevity in the U.S. population. The questions we ask allow to find the distribution as well as to quantify the degree of risk aversion with respect to the length of life in the population. We find evidence that roughly 75% of respondents were not neutral with respect to longevity risk. Higher income households are more likely to be risk averse. We do not find evidence that the degree of risk aversion varies with age or education.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 7317.

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Length: 21 pages
Date of creation: Mar 2013
Date of revision:
Handle: RePEc:iza:izadps:dp7317
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  1. Bommier, Antoine & Leroux, Marie-Louise & Lozachmeur, Jean-Marie, 2011. "On the public economics of annuities with differential mortality," Journal of Public Economics, Elsevier, vol. 95(7), pages 612-623.
  2. Bommier, Antoine & Villeneuve, Bertrand, 2008. "Risk Aversion and the Value of Risk to Life," MPRA Paper 11943, University Library of Munich, Germany.
  3. Cagetti, Marco, 2003. "Wealth Accumulation over the Life Cycle and Precautionary Savings," Journal of Business & Economic Statistics, American Statistical Association, vol. 21(3), pages 339-53, July.
  4. BOMMIER, Antoine & LEROUX, Marie-Louise & LOZACHMEUR, Jean-Marie, . "Differential mortality and social security," CORE Discussion Papers RP -2285, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. Leroux, M.-L. & Pestieau, P. & Ponthiere, G., 2011. "Longevity, genes and efforts: An optimal taxation approach to prevention," Journal of Health Economics, Elsevier, vol. 30(1), pages 62-76, January.
  6. Antoine Bommier, 2001. "Uncertain lifetime and intertemporal choice : risk aversion as a rationale for time discounting," Research Unit Working Papers 0108, Laboratoire d'Economie Appliquee, INRA.
  7. Kihlstrom, Richard E. & Mirman, Leonard J., 1974. "Risk aversion with many commodities," Journal of Economic Theory, Elsevier, vol. 8(3), pages 361-388, July.
  8. Marc Fleurbaey & Marie-Louise Leroux & Grégory Ponthière, 2010. "Compensating the dead? Yes we can!," PSE Working Papers halshs-00564934, HAL.
  9. FLEURBAEY, Marc & LEROUX, Marie - Louise & PONTHIERE, Gregory, 2010. "Compensating the dead? Yes we can!," CORE Discussion Papers 2010066, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  10. André Masson & Daniel Verger & Luc Arrondel, 2004. "Mesurer les préférences individuelles à l'égard du risque," Économie et Statistique, Programme National Persée, vol. 374(1), pages 53-85.
  11. Joseph E. Aldy & W. Kip Viscusi, 2004. "Age Variations in Workers' Value of Statistical Life," NBER Working Papers 10199, National Bureau of Economic Research, Inc.
  12. repec:hal:wpaper:halshs-00564934 is not listed on IDEAS
  13. Lawrance, Emily C, 1991. "Poverty and the Rate of Time Preference: Evidence from Panel Data," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 54-77, February.
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