Probabilistic survey questions and incorrect answers: Retirement income replacement rates

We study responses to subjective retirement income replacement rate expectations questions in a survey of Dutch employees. One out of three respondents is unable to provide probabilities satisfying the requirements of a cumulative distribution function. We show that using probabilistic survey questions yields an endogenous sample selection when these individuals are removed from the sample, biasing the results toward more pessimistic expectations and excess uncertainty in the replacement rate. These biases are most prevalent for less-educated individuals.

► We analyze responses to probabilistic survey questions on replacement rates.
► One out of three respondents violates basic laws of probabilities.
► Excluding inconsistent answers results in a selected sample.
► We quantify the selection bias using the Heckman selection model.
► The bias is large, especially for less-educated respondents.