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BROKEN-HEART, COMMON LIFE, HETEROGENEITY: ANALYZING THE SPOUSAL MORTALITY DEPENDENCE

Published online by Cambridge University Press:  20 April 2017

Yang Lu*
Affiliation:
Aix-Marseille School of Economics, Aix-Marseille University, 2 Rue de la Charite, 13001 Marseille, France

Abstract

Using data on joint annuities, we conduct an analysis of the inter-couple lifetime dependence. We estimate a mixed proportional hazards model with treatment effects, which disentangles the broken-heart syndrome from the spurious risk dependence induced by unobserved heterogeneities. We use a flexible semi-parametric distribution for the unobserved heterogeneities to allow for either positive or negative spurious risk dependence. We find that the effect of losing one's spouse is asymmetric for the two sexes. Moreover, although the broken-heart syndrome explains a large portion of the dependency, there is evidence of positive spurious risk dependence. These findings have important implications for the pricing of joint insurance products. Failure to take into account either of these two effects leads to pricing error that can be either positive or negative, depending on the characteristics of the couple.

Type
Research Article
Copyright
Copyright © Astin Bulletin 2017 

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