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Adverse selection in annuity markets: Evidence from the British Life Annuity Act of 1808

  • Rothschild, Casey G.

We study adverse selection using data from an 1808 Act of British Parliament that effectively opened a market for life annuities. Our analysis indicates significant selection effects. The evidence for adverse selection is strongest for a sub-sample of annuitants whose annuities were purchased by profit-seeking speculators, a sub-sample in which "advantageous selection" resulting from multi-dimensional heterogeneity is unlikely to have been significant. These results support the view that adverse selection can be masked by advantageous selection in empirical studies of standard insurance markets.

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Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 93 (2009)
Issue (Month): 5-6 (June)
Pages: 776-784

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Handle: RePEc:eee:pubeco:v:93:y:2009:i:5-6:p:776-784
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505578

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