Evidence on Individual Preferences for Longevity Risks

Delprat, Gaëtan;Leroux, Marie-Louise;Michaud, Pierre-Carl
(2016) Journal of Pension Economics and Finance — Vol. 15, n° 2, p. 160-179 (2016)

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Authors
  • Delprat, GaëtanDépartement des sciences économiques, ESG-UQAM
    Author
  • Leroux, Marie-LouiseDépartement des sciences économiques, ESG-UQAM, CESifo, CORE, CIRANO and CIRPEE, Montréal QC, Canada
    Author
  • Michaud, Pierre-CarlDépartement des sciences économiques, ESG-UQAM, RAND Corporation, CIRPEE and CIRANO
    Author
Abstract
The standard model of intertemporal choice assumes risk neutrality towards the length of life: under additivity of lifetime utility and expected utility assumptions, agents are not sensitive to a mean preserving spread in the length of life. Using a survey fielded in the RAND American Life Panel, this paper provides empirical evidence on possible deviation from risk neutrality with respect to longevity in the US population. The questions we ask allow to find the distribution as well as to quantify the degree of risk aversion with respect to the length of life in the population. We find evidence that roughly 75% of respondents were not neutral with respect to longevity risk. Hence, there is a little empirical support for the joint use of the expected utility and additive lifetime utility assumptions in life-cycle models. Higher income households are more likely to be risk averse towards the length of life. We do not find evidence that the degree of risk aversion varies with age or education.
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Delprat, G., Leroux, M.-L., & Michaud, P.-C. (2016). Evidence on Individual Preferences for Longevity Risks. Journal of Pension Economics and Finance, 15(2), 160-179. https://doi.org/10.1017/S1474747214000523 (Original work published 2016)