The taxation of life annuities under adverse selection
AbstractThis paper studies how annuities should be taxed in a Mirrlees-type model in the presence of adverse selection and a positive link between income and longevity. The government is able to address the adverse selection problem by implementing a progressive marginal tax rate on annuities. This amounts to subsidizing small annuities (purchased by low incomes) and taxing large annuities (purchased by high incomes). Numerical simulations suggest that the taxation is significant and becomes more pronounced as annuitants get older.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Journal of Public Economics.
Volume (Year): 94 (2010)
Issue (Month): 1-2 (February)
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/505578
Optimal taxation Asymmetric information Life cycle models and saving;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Angus S. Deaton & Christina Paxson, 2001.
"Mortality, Education, Income, and Inequality among American Cohorts,"
in: Themes in the Economics of Aging, pages 129-170
National Bureau of Economic Research, Inc.
- Angus Deaton & Christina Paxson, 1999. "Mortality, education, income and inequality among American cohorts," Working Papers 279, Princeton University, Woodrow Wilson School of Public and International Affairs, Center for Health and Wellbeing..
- Angus Deaton & Christina Paxson, 1999. "Mortality, Education, Income, and Inequality among American Cohorts," NBER Working Papers 7140, National Bureau of Economic Research, Inc.
- Thomas Davidoff & Jeffrey R. Brown & Peter A. Diamond, 2005.
"Annuities and Individual Welfare,"
American Economic Review,
American Economic Association, vol. 95(5), pages 1573-1590, December.
- Mirrlees, James A, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Wiley Blackwell, vol. 38(114), pages 175-208, April.
- Saez, Emmanuel, 2002.
"The desirability of commodity taxation under non-linear income taxation and heterogeneous tastes,"
Journal of Public Economics,
Elsevier, vol. 83(2), pages 217-230, February.
- Emmanuel Saez, 2000. "The Desirability of Commodity Taxation under Non-Linear Income Taxation and Heterogeneous Tastes," NBER Working Papers 8029, National Bureau of Economic Research, Inc.
- Johann K. Brunner & Susanne Pech, 2005.
"Optimum Taxation of Life Annuities,"
Economics working papers
2005-06, Department of Economics, Johannes Kepler University Linz, Austria.
- Andrew B. Abel, 1985.
"Capital Accumulation and Uncertain Lifetimes with Adverse Selection,"
NBER Working Papers
1664, National Bureau of Economic Research, Inc.
- Abel, Andrew B, 1986. "Capital Accumulation and Uncertain Lifetimes with Adverse Selection," Econometrica, Econometric Society, vol. 54(5), pages 1079-97, September.
- François Bourguignon & Amadéo Spadaro, 2008.
"Tax-benefit revealed social preferences,"
PSE Working Papers
- Hans-Martin von Gaudecker & Rembrandt D. Scholz, 2007. "Differential mortality by lifetime earnings in Germany," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 17(4), pages 83-108, August.
- Whitehouse, Edward, 1999.
"The tax treatment of funded pensions,"
Social Protection Discussion Papers
20126, The World Bank.
- Amy Finkelstein & James Poterba, 2000.
"Adverse Selection in Insurance Markets: Policyholder Evidence from the U.K. Annuity Market,"
NBER Working Papers
8045, National Bureau of Economic Research, Inc.
- Amy Finkelstein & James Poterba, 2004. "Adverse Selection in Insurance Markets: Policyholder Evidence from the U.K. Annuity Market," Journal of Political Economy, University of Chicago Press, vol. 112(1), pages 183-208, February.
- Pablo Antolín & Alain de Serres & Christine de la Maisonneuve, 2004. "Long-Term Budgetary Implications of Tax-Favoured Retirement Plans," OECD Economics Department Working Papers 393, OECD Publishing.
- Amedeo Spadaro & François Bourguignon, 2000.
"Redistribution et incitations au travail. Une application empirique simple de la fiscalité optimale,"
Presses de Sciences-Po, vol. 0(3), pages 473-487.
- François Bourguignon & Amedeo Spadaro, 2000. "Redistribution et incitations au travail. Une application empirique simple de la fiscalité optimale," Revue Économique, Programme National Persée, vol. 51(3), pages 473-487.
- Peter A. Diamond, 2005.
"Taxation, Incomplete Markets, and Social Security,"
MIT Press Books,
The MIT Press,
edition 1, volume 1, number 0262541823, December.
- Jeffrey R. Brown, 2007. "Rational and Behavioral Perspectives on the Role of Annuities in Retirement Planning," NBER Working Papers 13537, National Bureau of Economic Research, Inc.
- Atkinson, A. B. & Stiglitz, J. E., 1976. "The design of tax structure: Direct versus indirect taxation," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 55-75.
- Eckstein, Zvi & Eichenbaum, Martin & Peled, Dan, 1985. "Uncertain lifetimes and the welfare enhancing properties of annuity markets and social security," Journal of Public Economics, Elsevier, vol. 26(3), pages 303-326, April.
- Jusot, Florence, 2006. "The shape of the relationship between mortality and income in France," Economics Papers from University Paris Dauphine 123456789/425, Paris Dauphine University.
- Tuomala, Matti, 1990. "Optimal Income Tax and Redistribution," OUP Catalogue, Oxford University Press, number 9780198286059, October.
- Diamond, P., 1994.
"Optimal Income Taxation: An Exemple with a U-Shaped Pattern of Optimal Marginal Tax Rates,"
94-14, Massachusetts Institute of Technology (MIT), Department of Economics.
- Diamond, Peter A, 1998. "Optimal Income Taxation: An Example with a U-Shaped Pattern of Optimal Marginal Tax Rates," American Economic Review, American Economic Association, vol. 88(1), pages 83-95, March.
- Seade, J. K., 1977. "On the shape of optimal tax schedules," Journal of Public Economics, Elsevier, vol. 7(2), pages 203-235, April.
- Bommier, Antoine & Magnac, Thierry & Rapoport, Hillel & Roger, Muriel, 2003.
"Droits à la retraite et mortalité différentielle,"
IDEI Working Papers
181, Institut d'Économie Industrielle (IDEI), Toulouse, revised May 2004.
- Monika Bütler & Kim Peijnenburg & Stefan Staubli, 2013.
"How Much Do Means-Tested Benefits Reduce the Demand for Annuities?,"
NRN working papers
2013-11, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria.
- Monika Butler & Kim Peijnenburg & Stefan Staubli, 2011. "How Much Do Means-Tested Benefits Reduce the Demand for Annuities?," Working Papers 418, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Monika Bütler & Kim Peijnenburg & Stefan Staubli, 2011. "How Much Do Means-Tested Benefits Reduce the Demand for Annuities?," CESifo Working Paper Series 3493, CESifo Group Munich.
- Bütler, Monika & Peijnenburg, Kim & Staubli, Stefan, 2011. "How Much Do Means-Tested Benefits Reduce the Demand for Annuities?," Economics Working Paper Series 1124, University of St. Gallen, School of Economics and Political Science.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If references are entirely missing, you can add them using this form.