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Stimulating Annuity Markets

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  • Mierau, Jochen O.
  • Heijdra, Ben J.
  • Trimborn, Timo

    (Groningen University)

Abstract

We study the short-, medium-, and long-run implications of stimulating annuity markets in a dynamic general-equilibrium overlapping-generations model. We find that beneficial partial-equilibrium effects of stimulating annuity markets are counteracted by negative general-equilibrium repercussions. Balancing the positive partial-equilibrium and negative general-equilibrium forces we show that there exists some intermediate level of annuitization such that long-run welfare is maximized. Studying the transition to the optimal degree of annuitization shows that currently middle-aged individuals stand to gain most from the stimulation of annuity markets

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Paper provided by University of Groningen, Research Institute SOM (Systems, Organisations and Management) in its series Research Report with number 14015-EEF.

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Date of creation: 2014
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Handle: RePEc:dgr:rugsom:14015-eef

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  1. Rowena A. Pecchenino & Patricia S. Pollard, 1995. "The effects of annuities, bequests, and aging in an overlapping generations model of endogenous growth," Working Papers, Federal Reserve Bank of St. Louis 1995-008, Federal Reserve Bank of St. Louis.
  2. Hansen, G.D., 1991. "The Cyclical and Secular Behavior of the Labor Input : Comparing Efficiency Units and Hours Worked," Papers, California Los Angeles - Applied Econometrics 36, California Los Angeles - Applied Econometrics.
  3. Svetlana Pashchenko, 2010. "Accounting for non-annuitization," Working Paper Series, Federal Reserve Bank of Chicago WP-2010-03, Federal Reserve Bank of Chicago.
  4. Joachim Inkmann & Paula Lopes & Alexander Michaelides, 2009. "How Deep is the Annuity Market Participation Puzzle?," Working Papers, Central Bank of Cyprus 2009-5, Central Bank of Cyprus.
  5. Feigenbaum, James & Gahramanov, Emin & Tang, Xueli, 2013. "Is it really good to annuitize?," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 93(C), pages 116-140.
  6. Ben J. Heijdra & Jochen O. Mierau, 2009. "Annuity Market Imperfection, Retirement and Economic Growth," CESifo Working Paper Series 2717, CESifo Group Munich.
  7. Thomas Davidoff & Jeffrey R. Brown & Peter A. Diamond, 2003. "Annuities and Individual Welfare," NBER Working Papers 9714, National Bureau of Economic Research, Inc.
  8. Fehr, Hans & Habermann, Christian, 2008. "Welfare effects of life annuities: Some clarifications," Economics Letters, Elsevier, Elsevier, vol. 99(1), pages 177-180, April.
  9. Heijdra, Ben J. & Mierau, Jochen O. & Reijnders, Laurie S.M., 2011. "The Tragedy of Annuitization," Economics Series, Institute for Advanced Studies 268, Institute for Advanced Studies.
  10. Mathias Trabandt & Harald Uhlig, 2006. "How Far Are We From The Slippery Slope? The Laffer Curve Revisited," SFB 649 Discussion Papers SFB649DP2006-023, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  11. Susumu Imai & Michael P. Keane, 2004. "Intertemporal Labor Supply and Human Capital Accumulation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(2), pages 601-641, 05.
  12. Bruce, Neil & Turnovsky, Stephen J., 2013. "Social security, growth, and welfare in overlapping generations economies with or without annuities," Journal of Public Economics, Elsevier, Elsevier, vol. 101(C), pages 12-24.
  13. Yoram Ben-Porath, 1967. "The Production of Human Capital and the Life Cycle of Earnings," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 75, pages 352.
  14. Lee Lockwood, 2012. "Bequest Motives and the Annuity Puzzle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 15(2), pages 226-243, April.
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