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Title:Annuity market imperfection, retirement and economic growth PDF Logo
Authors:Heijdra, Ben J.
Mierau, Jochen O.
Issue Date:2009
Series/Report no.:CESifo working paper 2717
Abstract:We study the effects of an annuity market imperfection on individual agents' labour supply and retirement decisions and on the macroeconomic growth rate in an overlapping generations model with endogenous growth. We model imperfect annuities by introducing a load factor on the interest rate faced by finitely-lived agents. Our core model features age-independent wages and a constant mortality rate. In the first extension we study the implications for microeconomic decisions and macroeconomic outcomes of a hump-shaped life-cycle profile in labour productivity, whilst in the second extension we postulate a realistic mortality process. Our main findings are that the limited availability of annuities induces agents to retire early in the first two models, but later in the model with age-dependent mortality. In all cases, the general equilibrium repercussion is that economic growth is lower under imperfect annuities than with perfect annuities.
Subjects:annuity markets
retirement
endogenous growth
overlapping generations
demography
JEL:D52
D91
E10
J20
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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