Capital Accumulation and Annuities in an Adverse Selection Economy
AbstractThis paper suggests that adverse selection problems in competitive annuity markets can generate quantity constrained equilibria in which some agents whose length of lifetime is uncertain find it advantageous to accumulate capital privately. This occurs despite the higher rates of return on annuities. The welfare properties of these allocations are analyzed. It is shown that the level of capital accumulation is excessive in a Paretian sense. Policies which eliminate this inefficiency are discussed.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2046.
Date of creation: Oct 1986
Date of revision:
Publication status: published as Eichenbaum, Martin S. and Dan S. Peled. "Capital Accumulation and Annuitiesin an Adverse Selection Economy," Journal of Political Economy, Vol. 95, No. 2, April 1987, pp. 334-354.
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Other versions of this item:
- Eichenbaum, Martin S & Peled, Dan, 1987. "Capital Accumulation and Annuities in an Adverse Selection Economy," Journal of Political Economy, University of Chicago Press, vol. 95(2), pages 334-54, April.
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