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Stimulating annuity markets

Author

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  • Heijdra, Bernardus
  • Mierau, Jochen
  • 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 an intermediate level of annuitization such that the lifetime utility of steady-state agents is maximized. Studying the transition to this optimal degree of annuitization shows that currently middle-aged individuals stand to gain most from the stimulation of annuity markets. Complementing our main analysis, we highlight the centrality of the interplay between human-capital accumulation and annuity market policy.
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Suggested Citation

  • Heijdra, Bernardus & Mierau, Jochen & Trimborn, Timo, 2014. "Stimulating annuity markets," Research Report 14015-EEF, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    • Handle: RePEc:gro:rugsom:14015-eef
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    File URL: http://hdl.handle.net/11370/113fdb72-f388-456f-ac6d-66766b5e0a38
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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