Demand for life annuities from married couples with a bequest motive
AbstractThis paper will try to explain the “annuities puzzle” in greater depth by introducing the bequest motive, both strategic and altruistic. It will try to determine whether this motive really is a relevant feature influencing the demand for lifetime annuities from married couples. With this aim in mind, we develop an optimization model of the utility provided by purchasing a lifetime annuity with contingent survivor benefit or a joint survivor life annuity. Our model is based on that first put forward by Brown & Poterba (2000), to which we add elements from other models such as Friedman and Warshawsky’s (1990) and Vidal & Lejárraga's (2004) which include the bequest motive. This enables us to calculate equivalent wealth in various contexts: the possibility of access to actuarially fair annuity markets, the inclusion of so-called market imperfections, and the assumption that couples already have part of their wealth in pre-existing lifetime annuities. Numerical results are presented for the case of Spain. The bequest motive is found not to be a significant factor influencing the demand for annuities from couples. Indeed very few couples would be willing to purchase them once we take into account the combined effects of market imperfections, the possibility of pre-existing annuities and the bequest motive. These findings have repercussions for policy-makers regulating defined contribution capitalization systems which are complementary to defined benefit systems.
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.
Bibliographic InfoPaper provided by FEDEA in its series Working Papers with number 2005-11.
Date of creation:
Date of revision:
Contact details of provider:
Web page: http://www.fedea.net
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-05-29 (All new papers)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- José M. Labeaga & Ester Martínez Ros, . "Persistence and ability in the innovation decisions," Working Papers 2005-16, FEDEA.
- Pedro N. Rodríguez, & Simón Sosvilla-Rivero, 2006. "Understanding and Forecasting Stock Price Changes," Working Papers 2006-03, FEDEA.
- José M. Labeaga & Xisco Oliver & Amedeo Spadaro, . "Measuring Changes in Health Capital," Working Papers 2005-15, FEDEA.
- Corinne Mette, . "Wellbeing and dependency among European elderly: The role of social integration," Working Papers 2005-12, FEDEA.
- Federica Teppa, 2011. "Can the Longevity Risk Alleviate the Annuitization Puzzle? Empirical Evidence from Dutch Data," DNB Working Papers, Netherlands Central Bank, Research Department 302, Netherlands Central Bank, Research Department.
- Federica Teppa, 2011. "Can the longevity risk alleviate The annuitization puzzle? Empirical evidence from Dutch data," Working Papers 223, ECINEQ, Society for the Study of Economic Inequality.
- Andrés J. Marchante Mera & Bienvenido Ortega Aguaza & José Sánchez Maldonado, 2006. "Las dimensiones del bienestar en las Comunidades Autónomas Españolas. Un análisis de Sigma y Gamma-Convergencia," Working Papers 2006-05, FEDEA.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Carmen Arias).
If references are entirely missing, you can add them using this form.