A Behavioural Gap in Survival Beliefs

65 Pages Posted: 9 Apr 2021 Last revised: 28 Mar 2022

See all articles by Giovanna Apicella

Giovanna Apicella

University of St. Gallen

Enrico G. De Giorgi

University of St. Gallen - SEPS: Economics and Political Sciences

Date Written: March 7, 2022

Abstract

Life span uncertainty (longevity risk) impacts several economic decisions. Individuals can form and revise their survival beliefs making use of behavioural heuristics. We propose a model of sentiment, in which individuals are assumed to switch between optimistic and pessimistic expectations on their health. When optimism is persistent in the face of health shocks, or when individuals are more likely to change their sentiment from pessimistic to optimistic than otherwise, our model predicts survival under-estimation at young ages and over-estimation at old ages. An empirical analysis based on the longitudinal data from SHARE validates our model.

Keywords: longevity risk, mortality risk, subjective beliefs, sentiment

JEL Classification: D15, H31

Suggested Citation

Apicella, Giovanna and De Giorgi, Enrico G., A Behavioural Gap in Survival Beliefs (March 7, 2022). Available at SSRN: https://ssrn.com/abstract=3821595 or http://dx.doi.org/10.2139/ssrn.3821595

Giovanna Apicella

University of St. Gallen

Bodanstrasse 6
SEPS-HSG
St.Gallen, 9000
Switzerland

Enrico G. De Giorgi (Contact Author)

University of St. Gallen - SEPS: Economics and Political Sciences ( email )

Department of Economics
Bodanstrasse 6
CH-9000 St. Gallen
Switzerland
+41712242430 (Phone)

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