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The Cost of Uncertain Life Span

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  • Ryan D. Edwards

Abstract

A considerable amount of uncertainty surrounds life expectancy, the average length of life. The standard deviation in adult life span is about 15 years in the U.S., and theory and evidence suggest it is costly. I calibrate a utility-theoretic model of preferences over length of life and show that one less year in standard deviation is worth about half a mean life year. Differences in the standard deviation exacerbate cross-sectional differences in life expectancy between the U.S. and other industrialized countries, between rich and poor countries, and among poor countries. But accounting for the cost of life-span variance also appears to amplify recently discovered patterns of convergence in world average human well-being. This is partly for methodological reasons and partly because unconditional variance in human length of life, primarily the component due to infant mortality, has exhibited even more convergence than life expectancy. Sustained reductions in the standard deviation of adult life span, which have largely ceased among advanced nations, accounted for about 15 percent of the total economic value of gains against mortality in the U.S. prior to 1950 but only about 5 percent since.

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  • Ryan D. Edwards, 2008. "The Cost of Uncertain Life Span," NBER Working Papers 14093, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:14093
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    1. Joseph T. Lariscy & Claudia Nau & Glenn Firebaugh & Robert A. Hummer, 2016. "Hispanic-White Differences in Lifespan Variability in the United States," Demography, Springer;Population Association of America (PAA), vol. 53(1), pages 215-239, February.
    2. Antoine Bozio & Guy Laroque & Cormac O’Dea, 2017. "Discount rate heterogeneity among older households: a puzzle?," Journal of Population Economics, Springer;European Society for Population Economics, vol. 30(2), pages 647-680, April.
    3. Shripad Tuljapurkar & Ryan D. Edwards, 2011. "Variance in death and its implications for modeling and forecasting mortality," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 24(21), pages 497-526, March.
    4. Hippolyte d'Albis & Loesse Jacques Esso & Héctor Pifarré i Arolas, 2012. "Mortality Convergence Across High-Income Countries: An Econometric Approach," Documents de travail du Centre d'Economie de la Sorbonne 12076, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    5. Duncan Gillespie & Meredith Trotter & Shripad Tuljapurkar, 2014. "Divergence in Age Patterns of Mortality Change Drives International Divergence in Lifespan Inequality," Demography, Springer;Population Association of America (PAA), vol. 51(3), pages 1003-1017, June.
    6. Glenn Firebaugh & Francesco Acciai & Aggie Noah & Christopher Prather & Claudia Nau, 2014. "Why Lifespans Are More Variable Among Blacks Than Among Whites in the United States," Demography, Springer;Population Association of America (PAA), vol. 51(6), pages 2025-2045, December.
    7. Alyson van Raalte & Pekka Martikainen & Mikko Myrskylä, 2014. "Lifespan Variation by Occupational Class: Compression or Stagnation Over Time?," Demography, Springer;Population Association of America (PAA), vol. 51(1), pages 73-95, February.
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    10. Frank N. Caliendo & Aspen Gorry & Sita Slavov, 2017. "Survival Ambiguity and Welfare," NBER Working Papers 23648, National Bureau of Economic Research, Inc.
    11. Charles I. Jones & Peter J. Klenow, 2016. "Beyond GDP? Welfare across Countries and Time," American Economic Review, American Economic Association, vol. 106(9), pages 2426-2457, September.
    12. Isaac Sasson, 2016. "Trends in Life Expectancy and Lifespan Variation by Educational Attainment: United States, 1990–2010," Demography, Springer;Population Association of America (PAA), vol. 53(2), pages 269-293, April.
    13. Ryan D. Edwards, 2010. "Trends in World Inequality in Life Span Since 1970," NBER Working Papers 16088, National Bureau of Economic Research, Inc.
    14. Johannes Schoder & Peter Zweifel, 2011. "Flat-of-the-curve medicine: a new perspective on the production of health," Health Economics Review, Springer, vol. 1(1), pages 1-10, December.

    More about this item

    JEL classification:

    • I10 - Health, Education, and Welfare - - Health - - - General
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J17 - Labor and Demographic Economics - - Demographic Economics - - - Value of Life; Foregone Income
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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