Economic Growth and Longevity Risk with Adverse Selection
AbstractWe study the implications of adverse selection in annuity markets in a general-equilibrium model of the closed economy. Agents differ in their health type and invest their assets in the annuity market. Without informational asymmetries each agent would obtain an actuarially fair insurance. If the individual health types and total annuity purchases are unobservable to the annuity firms then there exists a pooling equilibrium in which all agents annuitize at a common rate. At this pooling rate unhealthy agents would eventually like to borrow but this would reveal their true health type. As a consequence, they rationally drop out of the market. Surprisingly, the welfare and growth effects of the informational asymmetries are rather small. Copyright Springer Science+Business Media New York 2013
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Bibliographic InfoArticle provided by Springer in its journal De Economist.
Volume (Year): 161 (2013)
Issue (Month): 1 (March)
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Web page: http://www.springerlink.com/link.asp?id=100260
Annuity markets; Adverse selection; Endogenous growth; Overlapping generations; Demography; D52; D91; E10; J10;
Other versions of this item:
- Ben J. Heijdra & Laurie S. M. Reijnders, 2009. "Economic Growth and Longevity Risk with Adverse Selection," CESifo Working Paper Series 2898, CESifo Group Munich.
- D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
- D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving
- E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
- J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
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