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Subjective Mortality Risk and Bequests

  • Li Gan
  • Guan Gong
  • Michael Hurd
  • Daniel McFadden

This paper investigates whether subjective expectations about future mortality affect consumption and bequests motives. We estimate a dynamic life-cycle model based on subjective survival rates and wealth from the panel dataset Asset and Health Dynamics among Oldest Old. We find that bequest motives are small on average, which indicates that most bequests are involuntary or accidental. Moreover, parameter estimates using subjective mortality risk perform better in predicting out-of-sample wealth levels than estimates using life table mortality risks, suggesting that decisions about consumption and saving are influenced more strongly by individual-level beliefs about mortality risk than by group level mortality risk.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10789.

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Date of creation: Sep 2004
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Publication status: published as Gan, Li & Gong, Guan & Hurd, Michael & McFadden, Daniel, 2015. "Subjective mortality risk and bequests," Journal of Econometrics, Elsevier, vol. 188(2), pages 514-525.
Handle: RePEc:nbr:nberwo:10789
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