Mortality, education and bequest
This dissertation examines the important role mortality risk plays in educational attainment and bequest motives. Chapter 1 investigates the importance of mortality risk in explaining racial difference in education based on a dynamic optimal stopping-point life cycle model. Calibration results show that that more than two-thirds of the empirical difference in education between black and white males can be accounted for by the difference in their mortality differences. Chapter 2 studies interdependence between health and educational attainment. The structural estimation framework fully imposes the restrictions of the existing theoretical hypotheses on the correlation between health and education. The model’s estimates imply that an individual’s initial health status has a substantial influence on an individual’s educational attainment and the expected probability of survival. Policy experiments based on the model’s estimates indicate that a health expenditure subsidy conditional on high school attendance would have a larger impact on the educational attainment than a direct college tuition subsidy. Chapter 3 investigates whether subjective expectations about future mortality affect consumption and bequests motives. A dynamic life-cycle model is applied to subjective survival rates and wealth from the panel dataset Asset and Health Dynamics among Oldest Old. The results show that bequest motives are small on average, which indicates that most bequests are involuntary or accidental. Moreover, parameter estimates using subjective mortality risk perform better in predicting out-of-sample wealth levels than estimates using life table mortality risk, suggesting that decisions about consumption and saving are influenced more strongly by individual-level beliefs about mortality risk than by group level mortality risk.