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Annuitisation and Mortality: Disentangling Selection from Behaviour

Author

Listed:
  • Eduardo Fajnzylber

    (IDB)

  • María Florencia Gabrielli

    (Universidad del Desarrollo)

  • Ignacio Willington

    (UTDT)

  • Manuel Willington

    (Universidad del Desarrollo)

Abstract

We re-examine the widely documented positive correlation between annuitisation and longevity by cleanly separating selection from causal effects—an empirical distinction that the literature has acknowledged but has not been able to identify credibly. Using administrative micro–data from Chile’s centralized pension quote system, we exploit monthly variation in the relative generosity of annuities versus programmed withdrawals generated by regulated PW formulas and market-based annuity pricing. These shocks serve as plausibly exogenous instruments for annuitisation in an IV bivariate probit model of post-retirement survival. Across horizons up to fifteen years, we find no statistically significant causal effect of annuitisation on survival for either men or women. The results imply that the observed longevity advantage of annuitants in Chile reflects selection rather than behavioral responses. By isolating the causal channel, the paper contributes to ongoing discussions on decumulation design by showing that moral-hazard-driven survival effects are unlikely to be a relevant policy concern in this setting

Suggested Citation

  • Eduardo Fajnzylber & María Florencia Gabrielli & Ignacio Willington & Manuel Willington, 2026. "Annuitisation and Mortality: Disentangling Selection from Behaviour," Working Papers 399, Red Nacional de Investigadores en Economía (RedNIE).
    • Handle: RePEc:aoz:wpaper:399
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    File URL: https://rednie.eco.unc.edu.ar/files/DT/399.pdf
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    References listed on IDEAS

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    2. Amy Finkelstein & James Poterba, 2004. "Adverse Selection in Insurance Markets: Policyholder Evidence from the U.K. Annuity Market," Journal of Political Economy, University of Chicago Press, vol. 112(1), pages 183-208, February.
    3. Marco Morales & Guillermo Larraín, 2017. "The Chilean Electronic Market for Annuities (SCOMP): Reducing Information Asymmetries and Improving Competition," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 42(3), pages 389-405, July.
    4. Liran Einav & Amy Finkelstein & Paul Schrimpf, 2010. "Optimal Mandates and the Welfare Cost of Asymmetric Information: Evidence From the U.K. Annuity Market," Econometrica, Econometric Society, vol. 78(3), pages 1031-1092, May.
    5. Gastón Illanes & Manisha Padi, 2019. "Retirement Policy and Annuity Market Equilibria: Evidence from Chile," NBER Working Papers 26285, National Bureau of Economic Research, Inc.
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    9. Fajnzylber, Eduardo & Gabrielli, M. Florencia & Willington, Manuel, 2023. "Can transparency increase adverse selection? Evidence from an electronic platform for annuities," Economics Letters, Elsevier, vol. 228(C).
    10. Benjamin Lester & Ali Shourideh & Venky Venkateswaran & Ariel Zetlin-Jones, 2019. "Screening and Adverse Selection in Frictional Markets," Journal of Political Economy, University of Chicago Press, vol. 127(1), pages 338-377.
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    Keywords

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    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation

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