What Age Do You Feel? – Subjective Age and Economic Behaviors

Building on recent findings in psychology, we study the impact of subjective age (feeling younger or older than one’s chronological age) on economic behaviors. Using data from the Health and Retirement Study we find that subjective age predicts economic behaviors: Individuals with younger age identities have higher work engagement, and their savings profile, as a function of the subjective age gap, is hump-shaped. The effects are economically significant, for example, increasing the subjective age gap by one standard deviation increases an individual’s likelihood to be employed in a subsequent HRS wave by 1.1% (about 21% of the conditional mean). The relationships found are consistent with an interplay of two subjective age channels: Ability (self-perceived abilities to perform certain economic behaviors) and Behavior (choosing (avoiding) “young” (“old”) behaviors). Our results multiple implications for policy and financial advice that traditionally target individuals based on chronological age. That is, for example, allowing more individual flexibility with respect to retirement decisions as well as adapting financial products and services to match with subjective age identities.