Effects of Longevity Optimism over Health and Financial Domains
University of Murcia
We measure ‘longevity optimism’ (LO) by comparing actual survival realizations of European end of life exit interviews data and individual self-reported longevity expectations. We then relate LO to ‘meteorological optimism’ (MO), that is how weather predictions and actual weather compare. We exploit the variation in individual’s life history to estimate the causal effect of LO on health, and financial behaviours. Sensitivity analysis with respect to the degree of violation of the exclusion restrictions confirms that our set of instruments based on parent’s living status and parent’s age of decease are `plausibly exogenous’. We find that one standard deviation change of LO increases the adoption of healthier lifestyles (the probability of being current smoker or having sedentary lifestyle decreases by 48.41% and 211.55%, respectively, and the probability of consuming alcohol every day or almost everyday decreases by 71.19%). It also has an impact on financial investments and increases the probability of holding fixed income securities: bonds by 45.45% with respect to mean probability, mutual funds by 50.12% and retirement accounts by 69.22%. In contrast, MO exerts a more considerable influence over financial behaviors (especially bonds and life insurance) rather than healthy lifestyles.