Annuity Markets, Savings, and the Capital Stock
This article examines how the availability of annuities affects savings and inequality in economies in which neither private nor public pensions initially exist. The absence of widespread market or government annuity insurance is clearly descriptive of many less developed countries in the world today; it was also a characteristic of virtually all countries prior to World War II. The paper compares economies with perfect insurance with economies in which completely selfish parents and children pool longevity risk to their mutual advantage. The analysis of the latter economies takes into account the infinite sequence of risk sharing bargains of successive parents with their children. Such bargains affect current risk sharing between parents and child because they determine the welfare of current children when they become parents. Calculations based on the CBS utility function indicate that perfecting annuity insurance can significantly reduce national savings. Indeed, the insurance aspects of government pensions are potentially as important as underfunding government pensions in reducing national savings.
|Date of creation:||Dec 1983|
|Date of revision:|
|Publication status:||published as Kotlikoff, Laurence J., John B. Shoven and Avia Spivak. "Annuity Markets, Savings, and the Capital Stock." Issues in Pension Economics, edited by Zvi Bodie, John Shoven and David A. Wise, Chicago: UCP, 1987.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Laurence J. Kotlikoff & Lawrence H. Summers, 1980.
"The Role of Intergenerational Transfers in Aggregate Capital Accumulation,"
NBER Working Papers
0445, National Bureau of Economic Research, Inc.
- Kotlikoff, Laurence J & Summers, Lawrence H, 1981. "The Role of Intergenerational Transfers in Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 706-32, August.
- Nash, John, 1953. "Two-Person Cooperative Games," Econometrica, Econometric Society, vol. 21(1), pages 128-140, April.
- Laurence J. Kotlikoff & Avia Spivak, 1979.
"The Family as an Incomplete Annuities Market,"
UCLA Economics Working Papers
151, UCLA Department of Economics.
- Eckstein, Zvi & Eichenbaum, Martin & Peled, Dan, 1985. "Uncertain lifetimes and the welfare enhancing properties of annuity markets and social security," Journal of Public Economics, Elsevier, vol. 26(3), pages 303-326, April.
- Feldstein, Martin S, 1974. "Social Security, Induced Retirement, and Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 905-26, Sept./Oct.
- Barro, Robert J., 1974.
"Are Government Bonds Net Wealth?,"
3451399, Harvard University Department of Economics.
- Davies, James B, 1981. "Uncertain Lifetime, Consumption, and Dissaving in Retirement," Journal of Political Economy, University of Chicago Press, vol. 89(3), pages 561-77, June.
- Eytan Sheshinski & Yoram Weiss, 1981.
"Uncertainty and Optimal Social Security Systems,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 96(2), pages 189-206.
- Abel, Andrew B, 1985. "Precautionary Saving and Accidental Bequests," American Economic Review, American Economic Association, vol. 75(4), pages 777-91, September.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:1250. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.