DP9123 Heterogeneity in Expected Longevities

Author(s): Josep Pijoan-Mas , José-Víctor Ríos-Rull

Publication Date: September 2012

Keyword(s): heterogeneity in mortality rates , inequality in health , life expectancies

JEL(s): I14 , I24 , J12 , J14

Programme Areas: International Macroeconomics , Labour Economics

Link to this Page: www.cepr.org/pubs/dps/DP9123.asp.asp

We develop a new methodology to compute differences in the expected longevity of individuals who are in different socioeconomic groups at age 50. We deal with the two main problems associated with the standard use of life expectancy: that people's socioeconomic characteristics evolve over the life cycle and that there is a time trend that reduces mortality over time. Using HRS data we uncover an enormous amount of heterogeneity in expected longevities between individuals in different socioeconomic groups. Additionally, our analysis allows us to provide an answer to the old question of how health protecting are education, wealth and marital status. To do so, we decompose the longevity differentials into differences in health at age 50, differences in the evolution of health with age, and differences in mortality conditional on health. Remarkably, the latter is the least important for most socioeconomic characteristics. In particular, education and wealth are health protecting but have very little impact on two-year mortality rates conditional on health. Finally, we document an increasing time trend of the socioeconomic gradient of longevity in the period 1992-2008, and a likely increase in the socioeconomic gradient of mortality rates in the near future. Last but not least, we show that the longevity differences that we find have welfare implications that dwarf the differences in consumption accruing to people in diefferent socioeconomic groups.