A parsimonious model of subjective life expectancy


Ludwig, Alexander ; Zimper, Alexander


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URL: http://ub-madoc.bib.uni-mannheim.de/2503
URN: urn:nbn:de:bsz:180-madoc-25031
Document Type: Working paper
Year of publication: 2007
Publication language: English
Institution: School of Law and Economics > Sonstige - Fakultät für Rechtswissenschaft und Volkswirtschaftslehre
MADOC publication series: Sonderforschungsbereich 504 > Rationalitätskonzepte, Entscheidungsverhalten und ökonomische Modellierung (Laufzeit 1997 - 2008)
Subject: 330 Economics
Classification: JEL: I10 D91 D83 C44 ,
Subject headings (SWD): Deutschland , Sterblichkeit , Rational Choice , Lernen , Theorie
Keywords (English): subjective survival expectations , ambiguity , Bayesian learning
Abstract: This paper develops a theoretical model for the formation of subjective beliefs on individual survival expectations. Data from the Health and Retirement Study (HRS) indicate that, on average, young respondents underestimate their true survival probability whereas old respondents overestimate their survival probability. Such subjective beliefs violate the rational expectations paradigm and are also not in line with the predictions of the rational Bayesian learning paradigm. We therefore introduce a model of Bayesian learning which combines rational learning with the possibility that the interpretation of new information is prone to psychological attitudes. We estimate the parameters of our theoretical model by pooling the HRS data. Despite a parsimonious parametrization we find that our model results in a remarkable fit to the average subjective beliefs expressed in the data.
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Das Dokument wird vom Publikationsserver der Universitätsbibliothek Mannheim bereitgestellt.




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Ludwig, Alexander ; Zimper, Alexander (2007) A parsimonious model of subjective life expectancy. Open Access [Working paper]
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