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Evidence on Individual Preferences for Longevity Risk

Author

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  • G. Delprat
  • M.-L. Leroux
  • P.-C. Michaud

Abstract

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.

Suggested Citation

  • G. Delprat & M.-L. Leroux & P.-C. Michaud, 2013. "Evidence on Individual Preferences for Longevity Risk," Cahiers de recherche 1304, CIRPEE.
  • Handle: RePEc:lvl:lacicr:1304
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    References listed on IDEAS

    as
    1. Antoine Bommier & Marie-Louise Leroux & Jean-Marie Lozachmeur, 2011. "Differential mortality and social security," Canadian Journal of Economics, Canadian Economics Association, vol. 44(1), pages 273-289, February.
    2. 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.
    3. Antoine Bommier & Bertrand Villeneuve, 2012. "Risk Aversion and the Value of Risk to Life," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 79(1), pages 77-104, March.
    4. Kihlstrom, Richard E. & Mirman, Leonard J., 1974. "Risk aversion with many commodities," Journal of Economic Theory, Elsevier, vol. 8(3), pages 361-388, July.
    5. 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.
    6. 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.
    7. repec:dau:papers:123456789/4812 is not listed on IDEAS
    8. Cagetti, Marco, 2003. "Wealth Accumulation over the Life Cycle and Precautionary Savings," Journal of Business & Economic Statistics, American Statistical Association, vol. 21(3), pages 339-353, July.
    9. Luc Arrondel & André Masson & Daniel Verger, 2004. "Mesurer les préférences individuelles à l'égard du risque," Économie et Statistique, Programme National Persée, vol. 374(1), pages 53-85.
    10. Antoine Bommier, 2006. "Uncertain Lifetime And Intertemporal Choice: Risk Aversion As A Rationale For Time Discounting," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(4), pages 1223-1246, November.
    11. Marc Fleurbaey & Marie-Louise Leroux & Grégory Ponthière, 2010. "Compensating the Dead? Yes we can!," IDEP Working Papers 1005, Institut d'economie publique (IDEP), Marseille, France, revised 20 Oct 2010.
    12. Marc Fleurbaey & Marie-Louise Leroux & Grégory Ponthière, 2010. "Compensating the dead? Yes we can!," Working Papers halshs-00564934, HAL.
    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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    Cited by:

    1. Leroux, Marie-Louise & Pestieau, Pierre & Ponthière, Grégory, 2015. "Longévité différentielle et redistribution : enjeux théoriques et empiriques," L'Actualité Economique, Société Canadienne de Science Economique, vol. 91(4), pages 465-497, Décembre.
    2. Harun Onder & Pierre Pestieau & Grégory Ponthière, 2017. "The domestic welfare loss of Syrian Civil War: An equivalent income approach," PSE Working Papers hal-01581896, HAL.
    3. Marie-Louise Leroux & Pierre Pestieau & Grégory Ponthière, 2014. "Longévité différentielle et redistribution : enjeux théoriques et empiriques," Working Papers halshs-01071723, HAL.

    More about this item

    Keywords

    Intertemporal choice; Risk aversion toward the Length of Life; Stated-Preference;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • I10 - Health, Education, and Welfare - - Health - - - General
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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