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Wealth and the Effect of Subjective Survival Probability

Author

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  • Sanna Nivakoski

    (UCD Geary Institute for Public Policy, University College Dublin)

Abstract

The life-cycle hypothesis predicts that longer life expectancy should, ceteris paribus, lead to the accumu- lation of more wealth during working life to fund consumption in retirement. The prediction is tested by examining whether subjective survival probability (SSP)- a proxy measure of self-assessed life ex- pectancy - affects wealth holdings among the pre-retirement older population. SSP is instrumented to address measurement error and reverse causality. The findings suggest that a 1 percentage point increase in the self-assessed probability of reaching age 75 increases an individual's financial wealth by approximately EUR 3,400 and total wealth (including pension wealth) by approximately EUR 6,200.

Suggested Citation

  • Sanna Nivakoski, 2015. "Wealth and the Effect of Subjective Survival Probability," Working Papers 201509, Geary Institute, University College Dublin.
  • Handle: RePEc:ucd:wpaper:201509
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    File URL: http://www.ucd.ie/geary/static/publications/workingpapers/gearywp201509.pdf
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    More about this item

    Keywords

    financial wealth; pension wealth; life-cycle hypothesis; longevity; subjective survival probability;

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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