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Betting on a long life: The role of subjective life expectancy in the demand for private pension insurance of german households

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  • Schulte, Katharina
  • Zirpel, Ulrike
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    Abstract

    With a view to investigating the presence of adverse selection, we analyze determinants of private pension insurance uptake of German households in a probit model. Using survey data on savings and old-age provision, we find that subjective life expectancy is positively related with the probability of having supplementary private pension insurance. This indicates that the German annuities market is in fact characterized by adverse selection. Furthermore, pre-existing annuities from the public pension system tend to be a substitute to private insurance, while financial literacy enhances the uptake. We also find evidence for a bequest motive in old-age provision, but see no indication for pooling longevity risk within couples. --

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    Bibliographic Info

    Paper provided by Christian-Albrechts-University of Kiel, Department of Economics in its series Economics Working Papers with number 2010,06.

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    Date of creation: 2010
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    Handle: RePEc:zbw:cauewp:201006

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    1. Hans-Martin von Gaudecker & Carsten Weber, 2004. "Surprises in a Growing Market Niche: An Evaluation of the German Private Life Annuities Market," The Geneva Papers on Risk and Insurance, The International Association for the Study of Insurance Economics, vol. 29(3), pages 394-416, 07.
    2. Börsch-Supan, Axel & Reil-Held, Anette & Schunk, Daniel, 2008. "Saving incentives, old-age provision and displacement effects: evidence from the recent German pension reform," Journal of Pension Economics and Finance, Cambridge University Press, vol. 7(03), pages 295-319, November.
    3. van Rooij, Maarten & Lusardi, Annamaria & Alessie, Rob, 2011. "Financial literacy and stock market participation," Journal of Financial Economics, Elsevier, vol. 101(2), pages 449-472, August.
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    Cited by:
    1. Pfarr, Christian & Schneider, Udo, 2011. "Choosing between subsidized or unsubsidized private pension schemes: a random parameters bivariate probit analysis," MPRA Paper 29400, University Library of Munich, Germany.

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