Looking for private information in self-assessed health

The paper investigates whether self-assessed health status (SAH) contains information about future mortality and morbidity, beyond the information that is contained in standard “observable” characteristics of individuals (including pre-existing diagnosed medical conditions). Using a ten-year span of the Canadian National Population Health Survey, we find that SAH does contain private information for future mortality and morbidity. Moreover the extra information in SAH is greater at older ages. In many developed countries there a major shift occurring from defined benefit (DB) to defined contributions (DC) pension arrangements. One consequence of this shift is an effective delay in the age at which workers commit to an annuity. Our results therefore suggest that adverse selection problems in annuity markets are likely to be more severe at older ages, and therefore, that the DB to DC shift may expose workers to greater longevity risk. This is an aspect of the DB to DC shift which has received little attention.