Welfare Gains and Annuities Demand

Miguel Sánchez-Romero

No 2005/02, Working Papers in Economic Theory from Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History)

Abstract: This paper extends the annuity demand theory, giving new reasons for the small annuities demand. Regarding this problem, Yaari (1965) claims, under the condition that no one can die in debt, that a selfish consumer will fully annuitized her savings, insofar as annuity asset yield dominate conventional assets yield. However, we demonstrated mathematically that, in a standard life-cycle model, when borrowings are unconstrained and financial markets are complete, a selfish consumer may prefer not to annuitize her savings. In addition, we analyze the desire to purchase annuities according to the risk aversion coefficient and wealth composition.

Keywords: Annuities Demand; Complete Markets; Myopic-selfish Behavior; Life-cycle Model (search for similar items in EconPapers)
JEL-codes: D11 D80 D91 G22 H55 J14 J17 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2005-12
New Economics Papers: this item is included in nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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