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Biased survival expectations and behaviours: does domain specific information matter?

Joan Costa-Font and Cristina Vilaplana-Prieto

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We study the formation of biased expectations across domains and examine whether they have a unique influence on health and financial behaviors. Combining individual-level longitudinal, retrospective, and end of life data from several European countries for more than a decade, we estimate the time-varying individual level bias in ‘survival expectations' (BSE) and compare it to a similar type of bias in the formation of ‘meteorological expectations' (BME). We exploit the variation across individual's family history (parental age at death) to evaluate the causal effect of BSE on health and financial behaviors, and we compare it to the effect of BME. This allows to investigate whether the BSE effect is due to private information, or another mechanism. We find that BSE increases the likelihood of engaging in less risky health and financial behaviors. We estimate that a one standard deviation increase in BSE reduces the average individual probability of smoking by 48% (and increase the probability of holding retirement accounts by 69%). In contrast, BME has little effect on healthy behaviors, and is only associated with a change in some financial behaviors.

Keywords: biased expectations; survival expectations; meteorological expectations; longevity optimism; private information; health behaviour; financial behaviour (search for similar items in EconPapers)
JEL-codes: D14 G22 I18 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2022-12-01
New Economics Papers: this item is included in nep-age, nep-eur and nep-hea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Published in Journal of Risk and Uncertainty, 1, December, 2022, 65(3), pp. 285 - 317. ISSN: 0895-5646

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http://eprints.lse.ac.uk/112709/ Open access version. (application/pdf)

Related works:
Journal Article: Biased survival expectations and behaviours: Does domain specific information matter? (2022) Downloads
Working Paper: Biased Survival Expectations and Behaviours: Does Domain Specific Information Matter? (2021) Downloads
Working Paper: Biased Survival Expectations and Behaviours: Does Domain Specific Information Matter? (2021) Downloads
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