Subjective life expectancies, time preference heterogeneity, and wealth inequality

Richard Foltyn and Jonna Olsson

Quantitative Economics, 2024, vol. 15, issue 3, 699-736

Abstract: This paper examines how objective and subjective heterogeneity in life expectancy affects savings behavior of healthy and unhealthy people. Using data from the Health and Retirement Study, we first document systematic biases in survival beliefs across self‐reported health: those in poor health not only have a shorter actual lifespan but also underestimate their remaining life time. To gauge the effect on savings behavior and wealth accumulation, we use an overlapping‐generations model where survival probabilities and beliefs evolve according to a health and survival process estimated from data. We conclude that differences in life expectancy are important to understand savings behavior, and that the belief biases, especially among the unhealthy, can explain up to a fifth of the observed health‐wealth gap.

Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.3982/QE2016

Related works:
Working Paper: Subjective Life Expectancies, Time Preference Heterogeneity, and Wealth Inequality (2024)
Working Paper: Subjective Life Expectancies, Time Preference Heterogeneity, and Wealth Inequality (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:quante:v:15:y:2024:i:3:p:699-736

Ordering information: This journal article can be ordered from
https://www.econometricsociety.org/membership

Access Statistics for this article

More articles in Quantitative Economics from Econometric Society Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().