Mortality risks, survival pessimism, and subjective well-Being: Evidence from the health and retirement study

The positive relationship between an individual's subjective well-being (SWB) and their future survival prospects has been well documented. Using data from the Health and Retirement Study (HRS), we present empirical evidence of how this relationship operates through various channels. We use a two-stage approach where objective survival probability estimates derived from our first-stage Cox model are used to construct the survival bias employed as the dependent variable in the second stage, with SWB and other demographic and health-related variables being covariates in both stages. Our findings reveal that even after controlling for objective health-related factors and potential private information on health and mortality, individuals’ SWB remains as a significant factor to their objective mortality. Moreover, respondents’ SWB also affects the bias in the survival estimation—measured as the disparity between their subjective and objective survival probabilities. In particular, a higher SWB is correlated with a reduction in survival pessimism. We provide new evidence that bias in survival estimates can distort consumption and saving decisions, and provide estimates of its impact on welfare across different levels of SWB.