Subjective Health Expectations

Abstract:     
In this paper, I derive subjective health expectations curves using the RAND-HRS data. These curves can be used in the estimation of structural life-cycle models. I first construct "health tables" from the RAND-HRS data and update subjective health expectations with information from these tables. The Bayesian updating mechanism corrects for focal point responses and reporting errors of the original health expectations variable. In addition, I test the quality of the health expectations measure and describe its correlation with various health indicators and other individual characteristics. I find that subjective health expectations do contain additional information that is not incorporated in subjective mortality expectations and that the rational expectations assumption cannot be rejected for subjective health expectations.

Number of Pages in PDF File: 71

Keywords: Subjective Health Expectations, Health Expectations, Bayesian Updating of Expectations

JEL Classification: I10, D84, C11, C23

working papers series