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Subjective Life Expectancy

Author

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  • Nicky Nicholls

    () (Department of Economics, University of Pretoria)

  • Alexander Zimper

    () (Department of Economics, University of Pretoria)

Abstract

Individuals' subjective life-expectancy, as elicited in large-scale surveys, shows underestimation of survival chances at young versus overestimation at old ages. These distorted perceptions of objective survival chances may cause young people to save too little and old people to accumulate too much wealth late in life with respect to the rational expectations benchmark model. Alternative explanations for these differences between perceived and objective survival chances include cognitive shortcomings or/and preference-based (motivational) reasons. To know the exact nature of these differences would be relevant for judging policy interventions that aim at influencing people’s savings behaviour.

Suggested Citation

  • Nicky Nicholls & Alexander Zimper, 2014. "Subjective Life Expectancy," Working Papers 201410, University of Pretoria, Department of Economics.
  • Handle: RePEc:pre:wpaper:201410
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    References listed on IDEAS

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    1. Adeline Delavande & Susann Rohwedder, 2008. "Differential Mortality in Europe and the U.S. Estimates Based on Subjective Probabilities of Survival," Working Papers 613, RAND Corporation.
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    Citations

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    Cited by:

    1. Alexander Zimper & Alexander Ludwig & Max Groneck, 2012. "A Life-Cycle Consumption Model with Ambiguous Survival Beliefs," 2012 Meeting Papers 693, Society for Economic Dynamics.
    2. Beshears, John & Choi, James J. & Laibson, David & Madrian, Brigitte C. & Zeldes, Stephen P., 2014. "What makes annuitization more appealing?," Journal of Public Economics, Elsevier, vol. 116(C), pages 2-16.
      • John Beshears & James Choi & David Laibson & Brigitte C. Madrian & Stephen P. Zeldes, 2012. "What Makes Annuitization More Appealing?," NBER Chapters,in: Retirement Benefits for State and Local Employees: Designing Pension Plans for the Twenty-First Century National Bureau of Economic Research, Inc.
    3. Rowena Crawford & Cormac O'Dea, 2014. "Cash and Pensions: Have the elderly in England saved optimally for retirement?," IFS Working Papers W14/22, Institute for Fiscal Studies.
    4. Groneck, Max & Ludwig, Alexander & Zimper, Alexander, 2013. "Ambiguous Survival Beliefs and Hyperbolic Discounting in a Life-Cycle Model," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79878, Verein für Socialpolitik / German Economic Association.
    5. Alexander Ludwig & Alexander Zimper, 2013. "A decision-theoretic model of asset-price underreaction and overreaction to dividend news," Annals of Finance, Springer, vol. 9(4), pages 625-665, November.
    6. Groneck, Max & Ludwig, Alexander & Zimper, Alexander, 2016. "A life-cycle model with ambiguous survival beliefs," Journal of Economic Theory, Elsevier, vol. 162(C), pages 137-180.
    7. De Donder Philippe & Leroux Marie-Louise, 2013. "Behavioral Biases and Long-Term Care Insurance: A Political Economy Approach," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 14(2), pages 551-575, May.
    8. John Payne & Namika Sagara & Suzanne Shu & Kirstin Appelt & Eric Johnson, 2013. "Life expectancy as a constructed belief: Evidence of a live-to or die-by framing effect," Journal of Risk and Uncertainty, Springer, vol. 46(1), pages 27-50, February.

    More about this item

    Keywords

    Health Retirement Study; Undersaving; Oversaving; Cumulative Prospect Theory; Likelihood Insensitivity;

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