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Can the Life Insurance Market Provide Evidence for a Bequest Motive?

  • Joachim Inkmann
  • Alexander Michaelides

Using U.K. microeconomic data, we analyze the empirical determinants of participation in the life insurance market. We find that term insurance demand is positively correlated with measures of bequest motives like being married, having children and/or subjective measures of strong bequest motives. We then show that a life-cycle model of life insurance demand, saving and portfolio choice can rationalize quantitatively the data in the presence of a bequest motive. These findings provide evidence supporting the presence of a bequest motive.

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File URL: http://hdl.handle.net/10.1111/j.1539-6975.2011.01455.x
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Article provided by The American Risk and Insurance Association in its journal The Journal of Risk and Insurance.

Volume (Year): 79 (2012)
Issue (Month): 3 (09)
Pages: 671-695

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Handle: RePEc:bla:jrinsu:v:79:y:2012:i:3:p:671-695
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  1. Jeffrey Brown, 2001. "Are the Elderly Really Over-Annuitized? New Evidence on Life Insurance and Bequests," NBER Chapters, in: Themes in the Economics of Aging, pages 91-126 National Bureau of Economic Research, Inc.
  2. Joachim Inkmann & Paula Lopes & Alexander Michaelides, 2011. "How Deep Is the Annuity Market Participation Puzzle?," Review of Financial Studies, Society for Financial Studies, vol. 24(1), pages 279-319.
  3. 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.
  4. Sule Alan, 2005. "Entry Costs and Stock Market Participation Over the Life Cycle," Working Papers 2005_1, York University, Department of Economics.
  5. Mariacristina De Nardi, 2002. "Wealth inequality and intergenerational links," Staff Report 314, Federal Reserve Bank of Minneapolis.
  6. Alexander Michaelides & Francisco J. Gomes, 2005. "Optimal life cycle asset allocation : understanding the empirical evidence," LSE Research Online Documents on Economics 193, London School of Economics and Political Science, LSE Library.
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