Subjective Survival Beliefs and Savings Decisions

Topic & Objectives

Quantitatively characterize biases between subjective survival beliefs and objective survival probabilities and the implications of these biases for savings behavior. Key Findings

Key Findings

Young people tend to underestimate their survival chances old people tend to overestimate them. This implies too little savings for retirement at young ages and asset decumulation at a too low speed at old age. 

Policy Implications

Conjecture: Optimal policy mix characterized by PAYG pension system and capital income taxes or, as an alternative, age dependent capital income taxes with negative capital income taxes (subsidies) in young age and positive taxes in old age.

Related Published Papers

Author/s	Title	Year	Area	Keywords
Max Groneck, Alexander Ludwig, Alexander Zimper	A Life-Cycle Model with Ambiguous Survival Beliefs Journal of Economic Theory	2016	Macro Finance	Cumulative prospect theory, Choquet expected utility, Dynamic inconsistency, Life-cycle hypothesis, Saving puzzles
Nils Grevenbrock, Max Groneck, Alexander Ludwig, Alexander Zimper	Cognition, Optimism and the Formation of Age-Dependent Survival Beliefs International Economic Review	2021	Macro Finance

Related Working Papers

No.	Author/s	Title	Year	Area	Keywords
73	Max Groneck, Alexander Ludwig, Alexander Zimper	A Life-Cycle Model with Ambiguous Survival Beliefs	2014	Macro Finance	Cumulative prospect theory, Choquet expected utility, Dynamic inconsistency, Life-cycle hypothesis, Saving puzzles
169	Max Groneck, Alexander Ludwig, Alexander Zimper	Who Saves More, the Naive or the Sophisticated Agent?	2017	Macro Finance	Survival beliefs; Ambiguity; Choquet expected utility; Dynamic inconsistency
200	Nils Grevenbrock, Max Groneck, Alexander Ludwig, Alexander Zimper	Cognition, Optimism and the Formation of Age-Dependent Survival Beliefs	2018	Macro Finance	Subjective Survival Beliefs, Probability Weighting Function, Conrmatory Bias, Cognition, Optimism, Pessimism

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