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The Effects of Annuities, Bequests, and Aging in an Overlapping Generations Model of Endogenous Growth

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  • Pecchenino, Rowena A
  • Pollard, Patricia S

Abstract

The authors examine the effects of introducing actuarially fair annuity markets into an overlapping generations model of endogenous growth. The complete annuitisation of agents' wealth is not, in general, dynamically optimal; the degree of annuitisation that is dynamically optimal depends nonmonotonically on the expected length of retirement and on the pay-as-you-go social security tax rate. The government has an incentive to restrict the availability of actuarially fair annuities contracts and can often move the economy from a pay-as-you-go to a fully-funded social security system via voluntary contributions to a government sponsored, actuarially fair pension today accompanied by reductions in social security taxes tomorrow. Copyright 1997 by Royal Economic Society.

Suggested Citation

  • 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.
    • Handle: RePEc:ecj:econjl:v:107:y:1997:i:440:p:26-46
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