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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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File URL: http://www.nber.org/papers/w10789.pdf
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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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Handle: RePEc:nbr:nberwo:10789
Note: AG
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  1. Laurence J. Kotlikoff & Lawrence H. Summers, 1980. "The Role of Intergenerational Transfers in Aggregate Capital Accumulation," NBER Working Papers 0445, National Bureau of Economic Research, Inc.
  2. David A. Wise, 2004. "Perspectives on the Economics of Aging," NBER Books, National Bureau of Economic Research, Inc, number wise04-1, October.
  3. Michael D. Hurd & Kathleen McGarry, 2002. "The Predictive Validity of Subjective Probabilities of Survival," Economic Journal, Royal Economic Society, vol. 112(482), pages 966-985, October.
  4. Hamermesh, Daniel S & Menchik, Paul L, 1987. "Planned and Unplanned Bequests," Economic Inquiry, Western Economic Association International, vol. 25(1), pages 55-66, January.
  5. Michael Hurd & James P. Smith, 2002. "Expected Bequests and Their Distribution," NBER Working Papers 9142, National Bureau of Economic Research, Inc.
  6. Daniel S. Hamermesh, 1982. "Expectations, Life Expectancy, and Economic Behavior," NBER Working Papers 0835, National Bureau of Economic Research, Inc.
  7. F. Thomas Juster & James P. Smith, 2004. "Improving the Quality of Economic Data: Lessons from the HRS and AHEAD," Labor and Demography 0402010, EconWPA.
  8. James M. Poterba, 1997. "The History of Annuities in the United States," NBER Working Papers 6001, National Bureau of Economic Research, Inc.
  9. Bernheim, B Douglas & Shleifer, Andrei & Summers, Lawrence H, 1985. "The Strategic Bequest Motive," Journal of Political Economy, University of Chicago Press, vol. 93(6), pages 1045-76, December.
  10. Hurd, Michael D, 1989. "Mortality Risk and Bequests," Econometrica, Econometric Society, vol. 57(4), pages 779-813, July.
  11. Susann Rohwedder & Steven J. Haider & Michael D. Hurd, 2004. "Increases in Wealth Among the Elderly in the Early 1990s: How Much is Due to Survey Design?," Working Papers 195, RAND Corporation Publications Department.
  12. Harish Chand & Li Gan, 2003. "The Effects of Bracketing in Wealth Estimation," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 49(2), pages 273-287, 06.
  13. Steven F. Venti & David A. Wise, 2001. "Aging and Housing Equity: Another Look," NBER Working Papers 8608, National Bureau of Economic Research, Inc.
  14. Li Gan & Michael Hurd & Daniel McFadden, 2003. "Individual Subjective Survival Curves," NBER Working Papers 9480, National Bureau of Economic Research, Inc.
  15. Wise, David A. (ed.), 1998. "Inquiries in the Economics of Aging," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226903033.
  16. Peter Adams & Michael D. Hurd & Daniel L. McFadden & Angela Merrill & Tiago Ribeiro, 2004. "Healthy, Wealthy, and Wise? Tests for Direct Causal Paths between Health and Socioeconomic Status," NBER Chapters, in: Perspectives on the Economics of Aging, pages 415-526 National Bureau of Economic Research, Inc.
  17. Michael D. Hurd & Daniel L. McFadden & Li Gan, 1998. "Subjective Survival Curves and Life Cycle Behavior," NBER Chapters, in: Inquiries in the Economics of Aging, pages 259-309 National Bureau of Economic Research, Inc.
  18. Kocherlakota, Narayana R., 1990. "On the 'discount' factor in growth economies," Journal of Monetary Economics, Elsevier, vol. 25(1), pages 43-47, January.
  19. David A. Wise, 2004. "Introduction to "Perspectives on the Economics of Aging"," NBER Chapters, in: Perspectives on the Economics of Aging, pages 1-16 National Bureau of Economic Research, Inc.
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