Dynamic Implications of Subjective Expectations: Evidence from Adult Smokers

Yang Wang

American Economic Journal: Applied Economics, 2014, vol. 6, issue 1, 1-37

Abstract: We set up a dynamic discrete choice model with subjective expectations data to explain adult smokers' find important differences between subjective survival probabilities and those estimated using observed mortality data. Subjectively, individuals attach less weight to their health conditions and smoking choices and more weight to such factors as age, race, and parents' longevity. Moreover, adult smokers are found to care more about their health and to be more forward-looking than predicted by a rational expectations framework. We further show the importance of unobserved heterogeneity in agents' subjective survival probabilities, and discuss policy implications of subjective expectations.

JEL-codes: D12 D84 I12 (search for similar items in EconPapers)
Date: 2014
Note: DOI: 10.1257/app.6.1.1
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Citations: View citations in EconPapers (27)

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