Working Paper: NBER ID: w12688
Authors: David E. Bloom; David Canning; Michael Moore; Younghwan Song
Abstract: We explore the proposition that expected longevity affects retirement decisions and accumulated wealth using micro data drawn from the Health and Retirement Study for the United States. We use data on a person's subjective probability of survival to age 75 as a proxy for their prospective lifespan. In order to control for the presence of measurement error and focal points in responses, as well as reverse causality, we instrument subjective survival probabilities using information on current age, or age at death, of the respondent's parents. Our estimates indicate that increased subjective probabilities of survival result in increased household wealth among couples, with no effect on the length of the working life. These findings are consistent with the view that retirement decisions are driven by institutional constraints and incentives and that a longer expected lifespan leads to increased wealth accumulation.
Keywords: subjective survival probabilities; retirement; wealth; health and retirement study
JEL Codes: D1; I1; J1; J22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Subjective survival probabilities (C41) | Household wealth (G59) |
| Husband's subjective survival probability (D15) | Household wealth (G59) |
| Wife's subjective survival probability (D15) | Household wealth (G59) |
| Parental mortality experiences (J12) | Subjective survival probabilities (C41) |
| Subjective survival probabilities (C41) | Length of working life (J29) |