Stimulating annuity markets

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Abstract


We study the short-, medium-, and long-run implications of stimulating annuity markets in a dynamic general-equilibrium overlapping-generations model. We find that beneficial partial-equilibrium effects of stimulating annuity markets are counteracted by negative general-equilibrium repercussions. Balancing the positive partial-equilibrium and negative general-equilibrium forces we show that there exists an intermediate level of annuitization such that the lifetime utility of steady-state agents is maximized. Studying the transition to this optimal degree of annuitization shows that currently middle-aged individuals stand to gain most from the stimulation of annuity markets. Complementing our main analysis, we highlight the centrality of the interplay between human-capital accumulation and annuity market policy.
Original languageEnglish
Pages (from-to)554-583
Number of pages30
JournalJournal of Pension Economics and Finance
Volume16
Issue number4
Early online date16-Apr-2016
DOIs
Publication statusPublished - Oct-2017

Keywords

  • EARNINGS
  • GROWTH
  • HUMAN-CAPITAL ACCUMULATION
  • LIFE-CYCLE
  • DEMOGRAPHIC-CHANGE
  • SOCIAL-SECURITY
  • WELFARE
  • CONSUMPTION
  • MODEL
  • overlapping generations
  • Individual welfare
  • annuity markets
  • computable general equilibrium

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