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HF 02: Life Expectancy, Saving, and Other Life-Cycle Decisions
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ID: 1793
Household Finance under the Shadow of Cancer Tilburg University I study the causal effects of life expectancy on households' financial and economic decisions. My sample consists of individuals who undergo genetic testing for a hereditary cancer syndrome. Genetic testing randomizes tested persons into two groups. Those who test positive learn that they face a high risk of cancer and a shorter life expectancy. Those who test negative learn that their cancer risk is not elevated. The differences in outcomes between these two groups identify the effects of life expectancy. I find that life expectancy has a positive effect on wealth accumulation. Lower savings rates, safer portfolios, decreased labor supply, and different preferences for household composition explain lower wealth accumulation under reduced life expectancy.
ID: 713
Mortality Beliefs and Saving Decisions: The Role of Personal Experiences University of Mannheim, Germany This paper is the first to non-experimentally establish a causal relationship between households’ mortality beliefs and subsequent saving and consumption decisions. Motivated by prior literature on the effect of personal experiences on individuals’ expectation formation, I exploit the death of a close friend as an exogenous shock to the salience of mortality of a household. Using data from a large household panel, I find that the death of a close friend induces a significant reduction in saving rate of 2.2 percentage points which persist over the following 5 years. I augment the life-cycle model of consumption by the experienced-based learning model and quantify the impact of this personal experience on mortality beliefs. Even though the shock has no material impact on a household’s situation, I find a quantitatively large initial reduction in expected survival probability of 7.1 percent.
ID: 807
Scared Away: Credit Demand Response to Expected Motherhood Penalty in the Labor Market 1CUHK Business School, The Chinese University of Hong Kong, Hong Kong S.A.R. (China); 2TCL Corporate Research(HK) Co., Ltd; 3National University of Singapore We exploit a policy reform that exogenously deteriorates mothers’ job prospects. China switched from a one-child policy to two-child in 2016, which increased female workers’ childbearing and caring responsibilities. Using a leading peer-to-peer lending platform targeting college students in China, we find that loan applications from female college students decrease by 15.6\% relative to male students after the reform. The drop suggests that female students can anticipate the poorer future job prospects; they reduce their expenditure and invest less in human capital accordingly. Applications for long-term and large-amount loans and loans for human capital investment purpose experience the largest decline. We also find that loan applications decrease after provincial governments' staggered extension of maternity leaves and that the decrease is more prominent when the expected motherhood penalty is greater. The results are unlikely driven by credit supply channels.
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