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Biased survival expectations and behaviours: does domain specific information matter?

Costa-Font, Joan ORCID: 0000-0001-7174-7919 and Vilaplana-Prieto, Cristina (2022) Biased survival expectations and behaviours: does domain specific information matter? Journal of Risk and Uncertainty. ISSN 0895-5646

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Identification Number: 10.1007/s11166-022-09382-z

Abstract

We study the formation of biased expectations across domains and examine whether they have a unique influence on health and financial behaviors. Combining individual-level longitudinal, retrospective, and end of life data from several European countries for more than a decade, we estimate the time-varying individual level bias in ‘survival expectations' (BSE) and compare it to a similar type of bias in the formation of ‘meteorological expectations' (BME). We exploit the variation across individual's family history (parental age at death) to evaluate the causal effect of BSE on health and financial behaviors, and we compare it to the effect of BME. This allows to investigate whether the BSE effect is due to private information, or another mechanism. We find that BSE increases the likelihood of engaging in less risky health and financial behaviors. We estimate that a one standard deviation increase in BSE reduces the average individual probability of smoking by 48% (and increase the probability of holding retirement accounts by 69%). In contrast, BME has little effect on healthy behaviors, and is only associated with a change in some financial behaviors.

Item Type: Article
Official URL: https://www.springer.com/journal/11166
Additional Information: © 2021 The Authors
Divisions: Health Policy
Subjects: H Social Sciences > HC Economic History and Conditions
R Medicine > RA Public aspects of medicine
B Philosophy. Psychology. Religion > BF Psychology
JEL classification: G - Financial Economics > G2 - Financial Institutions and Services > G22 - Insurance; Insurance Companies
I - Health, Education, and Welfare > I1 - Health > I18 - Government Policy; Regulation; Public Health
D - Microeconomics > D1 - Household Behavior and Family Economics > D14 - Personal Finance
Date Deposited: 22 Nov 2021 10:39
Last Modified: 12 Sep 2022 11:48
URI: http://eprints.lse.ac.uk/id/eprint/112709

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