Determinants and Implications of Mortality Risk at the End of the Life Cycle

The primary goal of this dissertation is to investigate the impacts of survival uncertainty on outcomes relevant to older Americans. While objective measures of life expectancy are useful in explaining economic outcomes, this dissertation also highlights the importance of subjective measures. In particular, results suggest survival beliefs provide otherwise unobservable information that better predict outcomes. Chapter one employs a Life Cycle model, showing that households smooth consumption and labor supply. Specifically, a longer expected lifetime is associated with the delay of consumption into the future and substitution of hours worked to the present. The second chapter develops a model for purchases of life insurance by older households and tests for the presence of marital bargaining power. Results indicate that increasing the relative bargaining power of the husband reduces the size of the insurance policy taken against the husband's life, and increases insurance taken on his wife's life. In other words, the household reallocates resources to states of nature that the husband places greater weight, and purchases insurance to guarantee adequate resources for funding optimal consumption in the event of the wife's death. Furthermore, results show systematic differences in the effect of survival uncertainty on life insurance purchases. In particular, life insurance purchases are decreasing with objective survival probabilities, but are increasing with subjective measures, suggesting the presence of asymmetric information. The secondary goal of this dissertation is to extend the literature examining the determinants of adult mortality. The third chapter examines the impacts of family characteristics such as parental and sibling on adult mortality at the objective level using survey data from the Health and Retirement Study. Using a competing risk model that controls for correlation between individual death and survey non-response, I find evidence that individuals with longer lived parents exhibit lower mortality risk. Increases in parental age not only affect mortality through increasing the predisposition to survive, but also through positive information from knowledge of extended parental survival and positive social relationships formed. Also, I find individuals with higher vitality and a higher opportunity cost to completing the survey are less likely to respond in future survey waves.

ISBN: 9781124229829

Mortality

24480