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Adverse selection in annuity markets: Evidence from the British Life Annuity Act of 1808

Casey Rothschild ()

Journal of Public Economics, 2009, vol. 93, issue 5-6, 776-784

Abstract: We study adverse selection using data from an 1808 Act of British Parliament that effectively opened a market for life annuities. Our analysis indicates significant selection effects. The evidence for adverse selection is strongest for a sub-sample of annuitants whose annuities were purchased by profit-seeking speculators, a sub-sample in which "advantageous selection" resulting from multi-dimensional heterogeneity is unlikely to have been significant. These results support the view that adverse selection can be masked by advantageous selection in empirical studies of standard insurance markets.

Keywords: Annuities; Adverse; selection; Advantageous; selection (search for similar items in EconPapers)
Date: 2009
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