Dynamic Implications of Subjective Expectations: Evidence from Adult Smokers

TitleDynamic Implications of Subjective Expectations: Evidence from Adult Smokers
Publication TypeJournal Article
Year of Publication2014
AuthorsWang, Y
JournalAmerican Economic Journal: Applied Economics
Volume6
Issue1
Pagination1-37
KeywordsConsumption and Savings, Expectations, Health Conditions and Status, Methodology, Other
Abstract

We set up a dynamic discrete choice model with subjective expectations data to explain adult smokers' find important differences between subjective survival probabilities and those estimated using observed mortality data. Subjectively, individuals attach less weight to their health conditions and smoking choices and more weight to such factors as age, race, and parents' longevity. Moreover, adult smokers are found to care more about their health and to be more forward-looking than predicted by a rational expectations framework. We further show the importance of unobserved heterogeneity in agents' subjective survival probabilities, and discuss policy implications of subjective expectations.

URLhttp://www.aeaweb.org/articles.php?doi=10.1257/app.6.1.1
DOI10.1257/app.6.1.1
Endnote Keywords

Consumer Economics/Empirical Analysis/Expectations/Speculations/Health Production

Endnote ID

999999

Citation Key8064