Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/68515
Authors: 
Heijdra, Ben J.
Mierau, Jochen O.
Reijnders, Laurie S. M.
Year of Publication: 
2011
Series/Report no.: 
Reihe Ökonomie, Institut für Höhere Studien 268
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

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