The Predictive Validity of Subjective Probabilities of Survival
Although expectations (or subjective probability distributions) play a prominent role in models of decision-making under uncertainty, we have very little data on them and are instead forced to base our models on unverifiable assumptions. Macroeconomic models often assume rational expectations, and microeconomic models base estimation on observable population probabilities. An alternative to these assumptions is to query individuals directly about their subjective probabilities, and to use the responses as measures of expectations. Prior research on subjective survival probabilities in the Health and Retirement Study has shown that reported probabilities aggregate closely to life table values and covary appropriately with known risk factors. This paper uses panel data to study the evolution of subjective survival probabilities and their ability to predict actual mortality. We find that respondents modify appropriately their survival probabilities based on new information. The onset of a new disease condition or the death of a parent between the waves is associated with a reduction in survival probabilities. The subjective survival probabilities also predict actual survival. Those who survived in our panel reported probabilities approximately 50 percent greater at baseline than those who died. Although more needs to be learned about properties of subjective probabilities we conclude that they show considerable promise for estimating models of decision-making under uncertainty.
|Date of creation:||Sep 1997|
|Date of revision:|
|Publication status:||published as as "Evaluation of the Subjective Probabilities of Survival in the Health and Retirement Study," Journal of Human Resources, 1995, Vol. 30 - Special issue on Health and Retirement Study, pp. S268-S292|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Manski, C.F., 1989. "The Use Of Intentions Data To Predict Behaviour : A Best- Case Analysis," Working papers 8905, Wisconsin Madison - Social Systems.
- Jeff Dominitz & Charles F. Manski, 1994.
"Using Expectations Data to Study Subjective Income Expectations,"
NBER Working Papers
4937, National Bureau of Economic Research, Inc.
- Jeff Dominitz & Charles F. Manski, 1994. "Using Expectations Data to Study Subjective Income Expectations," Econometrics 9411003, EconWPA.
- J. Dominitz & C. F. Manski, . "Using expectations data to study subjective income expectations," Institute for Research on Poverty Discussion Papers 1050-94, University of Wisconsin Institute for Research on Poverty.
- Daniel S. Hamermesh, 1982. "Expectations, Life Expectancy, and Economic Behavior," NBER Working Papers 0835, National Bureau of Economic Research, Inc.
- Daniel S. Hamermesh, 1985. "Expectations, Life Expectancy, and Economic Behavior," The Quarterly Journal of Economics, Oxford University Press, vol. 100(2), pages 389-408.
- F. Thomas Juster, 1966. "Consumer Buying Intentions and Purchase Probability: An Experiment in Survey Design," NBER Books, National Bureau of Economic Research, Inc, number just66-2, June.
- F. Thomas Juster & Richard Suzman, 1995. " An Overview of the Health and Retirement Study," Journal of Human Resources, University of Wisconsin Press, vol. 30, pages s7-s56.
- Michael D. Hurd & Kathleen McGarry, 1995. "Evaluation of the Subjective Probabilities of Survival in the Health and Retirement Study," Journal of Human Resources, University of Wisconsin Press, vol. 30, pages s268-s292.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:6193. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.