Denial of Death and Economic Behavior

37 Pages Posted: 20 Nov 2006

See all articles by Wojciech Kopczuk

Wojciech Kopczuk

Columbia University - Graduate School of Arts and Sciences - Department of Economics; Columbia University - School of International & Public Affairs (SIPA); National Bureau of Economic Research (NBER)

Joel B. Slemrod

University of Michigan, Stephen M. Ross School of Business; National Bureau of Economic Research (NBER)

Date Written: July 2005

Abstract

We model denial of death and its effect on economic behavior. Attempts to reduce death anxiety and the possibility of denial of mortality-relevant information interact with intertemporal choices and may lead to time-inconsistent behavior and other "behavioral" phenomena. In the model, repression of signals of mortality leads to underconsumption for unsophisticated individuals, but forward-sophisticated individuals may over-consume in anticipation of future denial and may seek ways to commit to act according to one's mortality prospects as currently perceived. We show that the mere possibility of engaging in this kind of denial leads to time-inconsistent but efficient behavior. Refusal to face up to the reality of death may help explain a wide range of empirical phenomena, including the underutilization of tax-advanced inter vivos gifts and inadequate purchase of life insurance.

Suggested Citation

Kopczuk, Wojciech and Slemrod, Joel B., Denial of Death and Economic Behavior (July 2005). NBER Working Paper No. w11485. Available at SSRN: https://ssrn.com/abstract=762764

Wojciech Kopczuk (Contact Author)

Columbia University - Graduate School of Arts and Sciences - Department of Economics ( email )

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Columbia University - School of International & Public Affairs (SIPA)

420 West 118th Street
New York, NY 10027
United States

National Bureau of Economic Research (NBER) ( email )

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Joel B. Slemrod

University of Michigan, Stephen M. Ross School of Business ( email )

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734-936-3914 (Phone)
734-763-4032 (Fax)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

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