Author: Fang, Hanming ; Silverman, Dan
Working Paper: Beliefs About Future Health and the Demand for Health and Health Insurance (PDF) ; July 2004
Abstract:
Beliefs about future health should play an important role in determining current
health decisions. In theory, the direction of the effect of differences in expectations
for longevity on health investments is unclear. Greater optimism may make current
health investments either more or less appealing. OLS estimates using data from the
Health and Retirement Study show that beliefs about longevity are only weakly associated
with current health decisions after conditioning a number of other demographic
and economic characteristics. Problems of reverse causality and omitted variables imply
that these OLS estimates may be misleading. An individual’s index of general
optimism, measured as the tendency to answer questions about macroeconomic and
policy events optimistically, is not subject to the reverse causality problem. There is
a statistically significant and relatively large positive association between general optimism
and most health investments. As an instrument for beliefs about future health,
however, the index of optimism is weak. Therefore, IV estimates indicating that more
optimistic beliefs about future health substantially increase the likelihood of making
most health investments are difficult to interpret. |
