Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/73266
Authors: 
Pech, Susanne
Year of Publication: 
2004
Series/Report no.: 
Working Paper, Department of Economics, Johannes Kepler University of Linz 0414
Abstract: 
There are two stylised facts, namely weak demand for life-annuities and flat age-wealth profile that contradict the life-cycle hypothesis. In this paper we design a theoretical framework, which combines plausible arguments, which have been put forward in the literature to reconcile theory with empirical evidence. Besides the existence of an annuity market and of a public pension system we assume risk-averse individuals who are uncertain about lifetime and disposable income and who have preferences for leaving bequests. It is shown that this framework can contribute to explain the observed portfolio decision in favour of financial assets relatively to annuities.
Subjects: 
savings
life annuities
bequests
uncertain lifetime
uncertain income
social security
JEL: 
D81
D91
G22
H55
Document Type: 
Working Paper

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