Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/171600
Authors: 
Bommier, Antoine
Le Grand, François
Year of Publication: 
2012
Series/Report no.: 
Economics Working Paper Series 12/157
Abstract: 
This paper suggests a new explanation for the low level of annuitization, which is valid even if one assumes perfect markets. We show that, as soon there exists a positive bequest motive, sufficiently risk averse individuals should not purchase annuities. A model calibration accounting for temporal risk aversion generates a willingness-to-pay for annuities, which is significantly smaller than the one generated by a standard Yaari (1965) model. Moreover, the calibration predicts that riskless savings finances one third of consumption, in line with empirical findings.
Subjects: 
annuity puzzle
insurance demand
bequest
intergenerational transfers
temporal risk aversion
multiplicative preferences
JEL: 
D11
D81
D91
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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