Survival Ambiguity and Welfare

  title={Survival Ambiguity and Welfare},
  author={F. Caliendo and Aspen Gorry and S. Slavov},
  journal={Political Economy: Government Expenditures \& Related Policies eJournal},
Abstract Nearly all life-cycle models adopt Yaari’s (1965) assumption that individuals know the survival probabilities that they face. Given that an individual’s exact survival probabilities are likely unknown, we explore the implications of relaxing this assumption. If there is no annuity market, then the welfare cost of survival ambiguity is large and regressive. Ambiguity neutral individuals would pay as much as 1% of total lifetime consumption for immediate resolution of ambiguity and the… Expand