Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/19106
Authors: 
Brunner, Johann K.
Pech, Susanne
Year of Publication: 
2006
Series/Report no.: 
CESifo Working Paper 1642
Abstract: 
The market for private life annuities is characterised by adverse selection, that is, contracts offer lower than fair payoffs to individuals with low life expectancy. Moreover, life expectancy and income have been found to be positively correlated. The paper shows that a linear tax on annuity payoffs, which raises more revenues from long-living individuals than from short-living, represents an appropriate instrument for redistribution, in addition to an optimally designed labour income tax. Further, we find that a nonlinear tax on annuity payoffs can be directly employed to correct the distortion of the rate of return caused by asymmetric information. These results are contrasted with theoretical findings concerning the role of a tax on capital income.
Subjects: 
optimum taxation
life annuities
adverse selection
JEL: 
G2
H2
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.