Conference Agenda

Session
HF 02: Life Expectancy, Saving, and Other Life-Cycle Decisions
Time:
Thursday, 17/Aug/2023:
1:30pm - 3:00pm

Session Chair: Tabea Bucher-Koenen, ZEW-Leibniz Center for European Economic Research
Location: 2A-33 (floor 2)


Presentations
ID: 1793

Household Finance under the Shadow of Cancer

Daniel Karpati

Tilburg University

Discussant: Maarten Lindeboom (Vrije Universiteit Amsterdam)

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.

EFA2023_1793_HF 02_1_Household Finance under the Shadow of Cancer.pdf


ID: 713

Mortality Beliefs and Saving Decisions: The Role of Personal Experiences

Frederik Horn

University of Mannheim, Germany

Discussant: Johannes Kasinger (Leibniz Institute for Financial Research SAFE)

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.

EFA2023_713_HF 02_2_Mortality Beliefs and Saving Decisions.pdf


ID: 807

Scared Away: Credit Demand Response to Expected Motherhood Penalty in the Labor Market

Darwin Choi1, Zhenyu Gao1, Singsen Lam1, Tian Li2, Wenlan Qian3

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

Discussant: Alexandru Barbu (INSEAD)

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.

EFA2023_807_HF 02_3_Scared Away.pdf