How Deep is the Annuity Market Participation Puzzle?
45 Pages Posted: 3 Mar 2008
There are 3 versions of this paper
How Deep is the Annuity Market Participation Puzzle?
How Deep is the Annuity Market Participation Puzzle?
How Deep is the Annuity Market Participation Puzzle?
Date Written: January 11, 2008
Abstract
Using U.K. microeconomic data, we analyze the empirical determinants of voluntary annuity market demand. We find that annuity market participation increases with financial wealth, life expectancy and education and decreases with other pension income and a possible bequest motive for surviving spouses. We then show that these empirically-motivated determinants of annuity market participation have the same, quantitatively important, effects in a life-cycle model of annuity demand, saving and portfolio choice. Moreover, reasonable preference parameters predict annuity demand levels comparable to the data, thereby questioning the conventional wisdom that limited annuity market participation is a puzzle to be explained.
Keywords: Annuities, portfolio choice, bequest motive
JEL Classification: E21, H00
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Portfolio Choice in Retirement: Health Risk and the Demand for Annuities, Housing, and Risky Assets
-
Portfolio Choice in Retirement: Health Risk and the Demand for Annuities, Housing, and Risky Assets
-
To Leave or Not to Leave: The Distribution of Bequest Motives
By Wojciech Kopczuk and Joseph Lupton
-
To Leave or Not to Leave: The Distribution of Bequest Motives
By Wojciech Kopczuk and Joseph Lupton
-
Why Do the Elderly Save? The Role of Medical Expenses
By Mariacristina De Nardi, Eric French, ...
-
Why Do the Elderly Save? The Role of Medical Expenses
By Mariacristina De Nardi, Eric French, ...
-
By John Ameriks, Andrew Caplin, ...
-
By John Ameriks, Andrew Caplin, ...
-
Health and (Other) Asset Holdings
By Julien Hugonnier, Florian Pelgrin, ...
-
Optimizing the Equity-Bond-Annuity Portfolio in Retirement: The Impact of Uncertain Health Expenses
By Gaobo Pang and Mark J. Warshawsky