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ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >
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http://hdl.handle.net/10419/39053
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| Title: | | The tragedy of annuitization  |
| Authors: | | Heijdra, Ben J. Mierau, Jochen O. Reijnders, Laurie S. M. |
| Issue Date: | | 2010 |
| Series/Report no.: | | CESifo working paper Public Finance 3141 |
| Abstract: | | We construct a tractable discrete-time overlapping generations model of a closed economy and use it to study government redistribution of accidental bequests and private annuities in general equilibrium. Individuals face longevity risk as there is a positive probability of passing away before the retirement period. We find non-pathological cases where it is better for long-run welfare to waste accidental bequests than to give them to the elderly. Next we study the introduction of a perfectly competitive life insurance market offering actuarially fair annuities. There exists a tragedy of annuitization: although full annuitization of assets is privately optimal it is not socially beneficial due to adverse general equilibrium repercussions. |
| Subjects: | | longevity risk risk sharing overlapping generations intergenerational transfers annuity markets |
| JEL: | | D52 D91 E10 J20 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CESifo Working Papers, CESifo Group Munich
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