We study biased survival expectations across two domains and examine whether they influence health and financial behaviours. Combining individual-level longitudinal, retrospective, and end of life data from several European countries for more than a decade, we estimate time-varying individual level bias in ‘survival expectations’ (BSE) and compare it to biased ‘meteorological expectations’ (BME). We exploit variation across individual’s family history (parental age at death) to estimate the effect of BSE on health and financial behaviours and compare it to the effect of BME. Finally, we discuss whether the effect of BSE results from the effect of private information, or other mechanism. We find that BSE increases the probability of adopting less risky health and financial behaviours. We estimate that a one standard deviation increase in BSE changes the average individual probability of smoking by 48% (holding retirement accounts by 69%). In contrast, BME barely affects healthy behaviours, and is only associated with a change in some financial behaviours.

Authors:
Cristina Vilaplana-Prieto, University of Murcia, Spain

About the Presenter(s)
Professor Cristina Vilaplana-Prieto is a University Associate Professor/Senior Lecturer at University of Murcia in Spain

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