Probabilistic Survey Questions and Incorrect Answers: Retirement Income Replacement Rates

26 Pages Posted: 19 Apr 2011

See all articles by Peter van Santen

Peter van Santen

affiliation not provided to SSRN

Rob J. M. Alessie

University of Groningen; Netspar; Tilburg University - Center for Economic Research (CentER)

Adriaan Kalwij

Utrecht University

Date Written: February 21, 2011

Abstract

We use probabilistic survey questions to analyze the determinants of individuals’ expected value of and the uncertainty in the retirement income replacement rate. We find that the expected replacement rate is U-shaped in age and is substantially lower for highereducated individuals. Uncertainty in pension income decreases with age, but increases with education. An important aim of this paper is to investigate if the use of probabilistic survey questions yields an endogenous sample selection by removing individuals that provide answers incompatible with probability theory. We find that not accounting for endogenous sample selection biases the results toward more pessimistic expectations and excess uncertainty in the replacement rate. These biases are most prevalent for less-educated individuals.

Keywords: probabilistic survey questions, retirement income replacement rate, uncertainty, sample selection bias

JEL Classification: H55, D91, E21

Suggested Citation

van Santen, Peter and Alessie, Rob J. M. and Kalwij, Adriaan, Probabilistic Survey Questions and Incorrect Answers: Retirement Income Replacement Rates (February 21, 2011). Netspar Discussion Paper No. 02/2011-011, Available at SSRN: https://ssrn.com/abstract=1809675 or http://dx.doi.org/10.2139/ssrn.1809675

Peter Van Santen (Contact Author)

affiliation not provided to SSRN

Rob J. M. Alessie

University of Groningen ( email )

P.O. box 800
9700 AV Groningen
Netherlands
050-3637240 (Phone)

HOME PAGE: http://members.chello.nl/~r.j.m.alessie

Netspar

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

HOME PAGE: http://www.netspar.nl

Tilburg University - Center for Economic Research (CentER)

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Adriaan Kalwij

Utrecht University ( email )

Janskerkhof 12
Utrecht, 3512 BL
Netherlands

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