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Subjective mortality risk and bequests. (English) Zbl 1337.91059

Summary: This paper investigates the ability of subjective expectations about life expectancy to predict wealth holding patterns in later life. Based on panel data from the Asset and Health Dynamics among the Oldest Old, we estimate a structural life-cycle model with bequests. Each individual’s subjective survival rates in the future are estimated with data on his belief of survival probabilities to a target age. This estimation is build upon a Bayesian updating method developed in [L. Gan et al., “Individual subjective survival curves”, in: Analyses in economics of aging I. Chicago: The University of Chicago Press. 377–411 (2005; doi:10.3386/w9480)]. We find that life-cycle model using subjective survival rates performs better than using life-table survival rates in predicting wealth holdings. This result suggests that subjective survival expectations play an important role in deciding consumption and savings. In addition, the estimation results show that most bequests are involuntary or accidental.

MSC:

91B82 Statistical methods; economic indices and measures
62P20 Applications of statistics to economics
91D20 Mathematical geography and demography
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