סמינר במימון חשבונאות

Abigail Hurwitz & Orly Sade ,Hebrew University

 Abstract: Previous research suggests that smoking is considered to be a major preventable risk to human health. One explanation for smoking, provided by the literature, is that it could be explained by differences in time preferences; Smokers are considered to have higher discount rates, implying asking for higher compensation in order to postpone any consumption from the present to the future. Concerns that are related to time preference and individual choices are also related to long term saving decisions. One of the long standing puzzles, with regard to long term saving choices, is the “Annuity Puzzle”. Theory suggests that annuities have substantial value, and that retirees should generally use annuities to increase their consumption in retirement. However, empirical work finds little evidence of the purchase of annuities.

We extend this line of research, investigating annuitization decisions of smokers, by using data from an Israeli insurance corporation, finding that, surprisingly, smokers, as compared with non-smokers, do not prefer the lump-sum option. A possible explanation for this finding could be that even though literature finds a close relation between smoking and medical condition, smokers do not perceive themselves as having a shorter horizon, meaning that smokers experience self-illusions regarding life expectancy. We support this conjecture with a survey we conducted that investigated the life expectancy of smokers and non-smokers.

The article will be  available from the finance-accounting seminar website:

https://en-recanati.tau.ac.il/Finance-Accounting-Seminars