Changes in subjective mortality expectations and savings during COVID-19: empirical analysis using questionnaire data in Japan

ABSTRACT

The COVID-19 pandemic may make people feel that they are likely to die in the near future. This study investigates how COVID-19 influences subjective mortality expectations and savings behaviour. We conducted a questionnaire survey in Japan with 2500 individuals, aged 20–79 years, who were working or whose spouses were working in January 2021. We empirically analysed the effect of an increase in subjective mortality on savings using the questionnaire response data. According to the questionnaire aggregation 33% of the respondents perceived an increase in the possibility of death because of COVID-19. Our empirical results, based on an instrumental variable method that considers the endogeneity of subjective mortality, show that increases in subjective mortality expectations due to COVID-19 have decreased savings. Therefore, the pandemic has decreased individuals’ motivation for saving, to a certain extent, owing to their heightened subjective mortality. Moreover, the experience of serious accidents negatively affects savings, whereas that of disasters has no significant effect.

KEYWORDS:

• COVID-19
• subjective mortality
• saving
• questionnaire data
• endogeneity

JEL CLASSIFICATION:

• I10
• J10
• O10

Acknowledgement

This study was approved by the Research Ethical Committee of the Graduate School University of Economics. We appreciate two anonymous referees, Dr. Saravana Ravindran for valuable comments. We also thank Dr. Kei Toyozawa for his diligent support in the survey of the past questionnaires and document research in Section 1, among others.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ Household saving rate refers to the share of net saving rate to the sum of disposable income and adjustment for the change in pension entitlements, receivable. Reasons for lower saving rate after 1990s and high saving rate before that were discussed in Braun et al. (2009) and Horioka (1990), respectively.

² Japan Times (2021 February, 6). Bank of Japan (2021) and Japan Times (2020b October, 11).

³ The Cabinet of Shinzo Abe approved a SCP on April 20, 2020 in the ‘Emergency Economic Measures for Coronavirus Infectious Diseases’, and its payment from May to August in 2020. The main purpose of SCP was as an emergency economic measure for COVID-19, to provide prompt and accurate support to residents with a simple mechanism.

⁴ For example, Consumer Confidence Survey by the Cabinet Office and Japanese Panel Survey of Consumers by Keio University in Japan are famous micro datasets in Japan.

⁵ If bequest motive is considered, longer life can decrease savings as Skinner (1985) indicates.

⁶ Disaster also has several kinds of impacts other than ‘no tomorrow tendency’ on savings. Disaster victims tend to get public compensation, which can decrease savings motivation, as is characterized by ‘charity hazard’ (Tesselaar et al. 2022). Sawada and Shimizutani (2008, 2011) found that victims of the Hanshin-Awaji Earthquake in Japan tended to borrow money and increase consumption. However, people who were affected by the disaster can become more cautious, and precautionary savings can increase. Skidmore (2001) and Skidmore and Toya (2002) found some empirical evidences that victims of earthquake increased saving.

⁷ We considered answers that took more than 2 minutes and less than 2 hours. We excluded the answers for more than 300 years for the question regarding subjective lifespan.

⁸ A matrix question is a closed-ended question that presents multiple question items simultaneously in multiple rows and requests respondents to select an answer for each item out of the same set of column choices. In this study, we deal with a matrix question with the following four options: strongly agree, agree, disagree, and strongly disagree.

⁹ This question is quoted from Osaka University Institute of Social and Economic Research (2020).

¹⁰ Mason (2007) suggests that income for younger age tends to be expended for children, and the wealth accumulation around age 50 and older accounts for the wealth of nations.

¹¹ For options of business details, we consider the following: 1. Agriculture, 2. Fishery and forestry, 3. Mining, 4. Construction, 5. Manufacturing, 6. Wholesale/Retail, 7. Restaurant/hotel, 8. Finance/Insurance, 9. Real estate, 10. Transportation, 11. Research and information services, 12. Information and Communications, except research and information services (e.g. telecommunications, broadcasting, Internet-based services), 13. Electricity, gas, heat supply and water, 14. Medical, health care and welfare, 15. Education and learning support, 16. Miscellaneous services, 17. Government, and 18. Other.

¹² As for medical history, we included the dummies for the following: Stroke, cerebral haemorrhage (stroke), cerebral infarction (stroke), other cerebrovascular diseases, angina, myocardial infarction, heart failure, ischaemic heart failure, other heart diseases, chronic renal failure, dialysis, anaemia, high blood pressure (hypertension), low blood pressure (hypotension), abnormal cardiac rhythm, hyperlipidaemia, renal diseases (except renal failure), diabetes, liver disease, gastric and duodenal ulcer, depression, osteoporosis, and other diseases.

¹³ Tochigi, Saitama, Chiba, Tokyo, Kanagawa, Gifu, Aichi, Kyoto, Osaka, Hyogo and Fukuoka prefectures had state of emergency at the end of January.

Additional information

Funding

The work was supported by the Japan Society for the Promotion of Science [JP18K11752,JP21K18434].