Working Paper: NBER ID: w10789
Authors: Li Gan; Guan Gong; Michael Hurd; Daniel McFadden
Abstract: This paper investigates whether subjective expectations about future mortality affect consumption and bequests motives. We estimate a dynamic life-cycle model based on subjective survival rates and wealth from the panel dataset Asset and Health Dynamics among Oldest Old. We find that bequest motives are small on average, which indicates that most bequests are involuntary or accidental. Moreover, parameter estimates using subjective mortality risk perform better in predicting out-of-sample wealth levels than estimates using life table mortality risks, suggesting that decisions about consumption and saving are influenced more strongly by individual-level beliefs about mortality risk than by group level mortality risk.
Keywords: Subjective Mortality Risk; Bequests; Dynamic Lifecycle Model; Consumption; Saving
JEL Codes: D91; C81
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| subjective expectations about future mortality (J17) | consumption (E21) |
| subjective expectations about future mortality (J17) | bequest motives (D64) |
| subjective mortality risk (J17) | out-of-sample wealth levels (E21) |
| life table mortality risks (C41) | consumption and saving decisions (E21) |