The individual life-cycle, annuity market imperfections and economic growth

Ben Heijdra () and Jochen Mierau

Journal of Economic Dynamics and Control, 2012, vol. 36, issue 6, 876-890

Abstract: We study the effects of an annuity market imperfection on individual agents' life-cycle decisions and on the macroeconomic growth rate in an overlapping generations model with single-sector endogenous growth. Our model features both age-dependent mortality and labour productivity. We model imperfect annuities by introducing a load factor on the annuity rate faced by finitely lived agents. Our main finding is that annuity market imperfections decrease economic growth because less assets are necessary for consumption late in life. In addition we find that both the quantitative and qualitative effects of annuity market imperfections are grossly overestimated in a partial equilibrium analysis because it disregards general equilibrium repercussions.

Keywords: Annuity markets; Retirement; Endogenous growth; Overlapping generations; Demography (search for similar items in EconPapers)
JEL-codes: D52 D91 E10 J20 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (37)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:36:y:2012:i:6:p:876-890

DOI: 10.1016/j.jedc.2012.01.001

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