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Stimulating annuity markets

Listed author(s):
  • HEIJDRA, BEN J.
  • MIERAU, JOCHEN O.
  • TRIMBORN, TIMO

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 some intermediate level of annuitization such that long-run welfare is maximized. Studying the transition to the optimal degree of annuitization shows that currently middle-aged individuals stand to gain most from the stimulation of annuity markets.

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Article provided by Cambridge University Press in its journal Journal of Pension Economics and Finance.

Volume (Year): 16 (2017)
Issue (Month): 04 (October)
Pages: 554-583

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Handle: RePEc:cup:jpenef:v:16:y:2017:i:04:p:554-583_00
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  7. Ben J. Heijdra & Laurie S. M. Reijnders, 2016. "Human Capital Accumulation and the Macroeconomy in an Ageing Society," De Economist, Springer, vol. 164(3), pages 297-334, September.
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  9. 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.
  10. Ben J. Heijdra & Jochen O. Mierau & Laurie S. M. Reijnders, 2010. "The Tragedy of Annuitization," CESifo Working Paper Series 3141, CESifo Group Munich.
  11. Pecchenino, Rowena A & Pollard, Patricia S, 1997. "The Effects of Annuities, Bequests, and Aging in an Overlapping Generations Model of Endogenous Growth," Economic Journal, Royal Economic Society, vol. 107(440), pages 26-46, January.
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  15. Imrohoroglu, Ayse & Imrohoroglu, Selahattin & Joines, Douglas H, 1995. "A Life Cycle Analysis of Social Security," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 6(1), pages 83-114, June.
  16. Heijdra, Ben J. & Mierau, Jochen O., 2012. "The individual life-cycle, annuity market imperfections and economic growth," Journal of Economic Dynamics and Control, Elsevier, vol. 36(6), pages 876-890.
  17. Alexander Ludwig & Thomas Schelkle & Edgar Vogel, 2012. "Demographic Change, Human Capital and Welfare," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 15(1), pages 94-107, January.
  18. Menahem E. Yaari, 1965. "Uncertain Lifetime, Life Insurance, and the Theory of the Consumer," Review of Economic Studies, Oxford University Press, vol. 32(2), pages 137-150.
  19. Daehaeng Kim & Chul-In Lee, 2007. "On-the-Job Human Capital Accumulation in a Real Business Cycle Model: Implications for Intertemporal Substitution Elasticity and Labor Hoarding," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 10(3), pages 494-518, July.
  20. Carter, Lawrence R. & Lee, Ronald D., 1992. "Modeling and forecasting US sex differentials in mortality," International Journal of Forecasting, Elsevier, vol. 8(3), pages 393-411, November.
  21. Heijdra, Ben J. & Mierau, Jochen O. & Reijnders, S. M., 2014. "A Tragedy Of Annuitization? Longevity Insurance In General Equilibrium," Macroeconomic Dynamics, Cambridge University Press, vol. 18(07), pages 1607-1634, October.
  22. 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.
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