Cohort and target age effects on subjective survival probabilities: Implications for models of the retirement phase

Shang Wu, Ralph Stevens and Susan Thorp

Journal of Economic Dynamics and Control, 2015, vol. 55, issue C, 39-56

Abstract: Subjective survival scaling factors are often estimated from one observation of life expectancy and treated as constant to any target age. Using new survey data on subjective survival probabilities, we estimate a model incorporating cohort- and target age-varying beliefs in scaling factors. Both cohort age and target age matter: respondents are pessimistic about overall life expectancy but optimistic about survival at advanced ages, and older respondents are more optimistic than younger. We propose a new theoretical model incorporating cohort- and target age-varying beliefs and illustrate their effects on the perceived value of annuities and on retirement phase consumption plans.

Keywords: Subjective life expectancy; Unobservable heterogeneity; Rational expectations; Life cycle model (search for similar items in EconPapers)
JEL-codes: D14 D84 I10 J11 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (31)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:55:y:2015:i:c:p:39-56

DOI: 10.1016/j.jedc.2015.03.003

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