How Deep is the Annuity Market Participation Puzzle?

Alexander Michaelides, Paula Lopes-Cocco and Joachim Inkmann

No 7940, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Using U.K. microeconomic data, we analyze the empirical determinants of voluntary annuity market demand. We find that annuity market participation increases with financial wealth, life expectancy and education and decreases with other pension income and a pos- sible bequest motive for surviving spouses. We then show that these empirically motivated determinants of annuity market participation have the same, quantitatively important, effects in a life-cycle model of annuity and life insurance demand, saving and portfolio choice. Moreover, reasonable preference parameters predict annuity demand levels comparable to the data. For stockholders, a strong bequest motive can simultaneously generate balanced portfolios and low annuity demand.

Keywords: Annuities; Bequest motive; Life insurance; Portfolio choice (search for similar items in EconPapers)
JEL-codes: E21 G11 H00 (search for similar items in EconPapers)
Date: 2010-08
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Citations: View citations in EconPapers (15)

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Related works:
Journal Article: How Deep Is the Annuity Market Participation Puzzle? (2011)
Working Paper: How Deep is the Annuity Market Participation Puzzle? (2009)
Working Paper: How deep is the annuity market participation puzzle? (2009)
Working Paper: How deep is the annuity market participation puzzle? (2007)
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