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Stimulating annuity markets*

Ben Heijdra (), Jochen Mierau () and Timo Trimborn ()

Journal of Pension Economics and Finance, 2017, vol. 16, issue 4, 554-583

Abstract: We study the short-, medium-, and long-run implications of stimulating annuity markets in a dynamic general-equilibrium overlapping-generations model. We find that beneficial partial-equilibrium effects of stimulating annuity markets are counteracted by negative general-equilibrium repercussions. Balancing the positive partial-equilibrium and negative general-equilibrium forces we show that there exists an intermediate level of annuitization such that the lifetime utility of steady-state agents is maximized. Studying the transition to this optimal degree of annuitization shows that currently middle-aged individuals stand to gain most from the stimulation of annuity markets. Complementing our main analysis, we highlight the centrality of the interplay between human-capital accumulation and annuity market policy.

Date: 2017
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Working Paper: Stimulating Annuity Markets (2014) Downloads
Working Paper: Stimulating annuity markets (2014) Downloads
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