EconPapers    
Economics at your fingertips  
 

Value of life and annuity demand

Svetlana Pashchenko and Ponpoje Porapakkarm ()

Journal of Risk & Insurance, 2022, vol. 89, issue 2, 371-396

Abstract: How does the value of life affect annuity demand? To address this question, we construct a portfolio choice problem with three key features: (i) agents have access to life‐contingent assets, (ii) they always prefer living to dying, (iii) agents have nonexpected utility preferences. We show that as utility from being alive increases, annuity demand decreases (increases) if agents are more (less) averse to risk rather than to intertemporal fluctuations. Put differently, if people prefer early resolution of uncertainty, they are less interested in annuities when the value of life is high. Our findings have two important implications. First, we get a better understanding of the well‐known annuity puzzle. Second, we argue that the observed low annuity demand provides evidence that people prefer early rather than late resolution of uncertainty.

Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://doi.org/10.1111/jori.12370

Related works:
Working Paper: Value of Life and Annuity Demand (2021) Downloads
Working Paper: Value of Life and Annuity Demand (2021) Downloads
Working Paper: Value of Life and Annuity Demand (2020) Downloads
Working Paper: Value of Life and Annuity Demand (2020) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jrinsu:v:89:y:2022:i:2:p:371-396

Ordering information: This journal article can be ordered from
http://www.wiley.com/bw/subs.asp?ref=0022-4367

Access Statistics for this article

Journal of Risk & Insurance is currently edited by Joan T. Schmit

More articles in Journal of Risk & Insurance from The American Risk and Insurance Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().

 
Page updated 2023-01-30
Handle: RePEc:bla:jrinsu:v:89:y:2022:i:2:p:371-396