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The Effect of Annuity Insurance and Savings and Inequality


  • Kotlikoff, Laurence J
  • Shoven, John
  • Spivak, Avia


This paper examines the amount of precautionary savings and wealth inequality arising from life-span uncertainty by comparing saving behavior under perfect insurance arrangements with that arising under imperfect arrangements, namely, when longevity risk can be pooled only with members of one's own family. The central findings of the paper are: (1) perfecting insurance arrangements can lower savings in intergenerationally altruistic and life-cycle economies and (2) in altruistic economies perfecting annuity insurance can influence in-equality; indeed, in the long run in the model, switching from imperfect family insurance to perfect insurance can mean the difference between absolute inequality and absolute equality. Copyright 1986 by University of Chicago Press.

Suggested Citation

  • Kotlikoff, Laurence J & Shoven, John & Spivak, Avia, 1986. "The Effect of Annuity Insurance and Savings and Inequality," Journal of Labor Economics, University of Chicago Press, vol. 4(3), pages 183-207, July.
  • Handle: RePEc:ucp:jlabec:v:4:y:1986:i:3:p:s183-207

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    References listed on IDEAS

    1. Lazear, Edward P, 1981. "Agency, Earnings Profiles, Productivity, and Hours Restrictions," American Economic Review, American Economic Association, vol. 71(4), pages 606-620, September.
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    3. Mincer, Jacob & Polachek, Solomon, 1974. "Family Investment in Human Capital: Earnings of Women," Journal of Political Economy, University of Chicago Press, vol. 82(2), pages 76-108, Part II, .
    4. James L. Medoff & Katharine G. Abraham, 1981. "Are Those Paid More Really More Productive? The Case of Experience," Journal of Human Resources, University of Wisconsin Press, vol. 16(2), pages 186-216.
    5. Becker, Gary S, 1985. "Human Capital, Effort, and the Sexual Division of Labor," Journal of Labor Economics, University of Chicago Press, vol. 3(1), pages 33-58, January.
    6. Stephen T. Marston, 1976. "Employment Instability and High Unemployment Rates," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 7(1), pages 169-210.
    7. Lundberg, Shelly J & Startz, Richard, 1983. "Private Discrimination and Social Intervention in Competitive Labor Markets," American Economic Review, American Economic Association, vol. 73(3), pages 340-347, June.
    8. Robert E. Hall, 1975. "The Rigidity of Wages and the Persistence of Unemployment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 6(2), pages 301-350.
    9. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-142, March.
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    Cited by:

    1. Aldieri, Luigi & Fiorillo, Damiano, 2015. "Private monetary transfers and altruism: An empirical investigation on Italian families," Economic Analysis and Policy, Elsevier, vol. 46(C), pages 1-15.
    2. C. Lee, 1998. "Life Cycle Savings in the United States, 1900-1990," CPE working papers 0014, University of Chicago - Centre for Population Economics.
    3. Gary S. Becker & Nigel Tomes, 1994. "Human Capital and the Rise and Fall of Families," NBER Chapters,in: Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education (3rd Edition), pages 257-298 National Bureau of Economic Research, Inc.
    4. Willman, Alpo, 2007. "Sequential optimization, front-loaded information, and U.S. consumption," Working Paper Series 765, European Central Bank.
    5. Michael Alexeev, 1992. "Saving Behavior And Soviet Reform," Contemporary Economic Policy, Western Economic Association International, vol. 10(3), pages 39-48, July.
    6. Rafael Di Tella & Robert MacCulloch, 2002. "Informal Family Insurance And The Design Of The Welfare State," Economic Journal, Royal Economic Society, vol. 112(481), pages 481-503, July.
    7. Aoki Takaaki, 2011. "On the Implications of Two-Sided Altruism in Human Capital Based OLG Model," Asian Journal of Law and Economics, De Gruyter, vol. 2(2), pages 1-40, July.

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