Redistribution and Insurance: Mandatory Annuitization with Mortality Heterogeneity

Jeffrey Brown

No 9256, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper examines the distributional implications of mandatory longevity insurance when there is mortality heterogeneity in the population. Previous research has demonstrated the significant financial redistribution that occurs under alternative annuity programs in the presence of differential mortality across groups. This paper embeds that analysis into a life cycle framework that allows for an examination of distributional effects on a utility-adjusted basis. It finds that the degree of redistribution that occurs from the introduction of a mandatory annuity program is substantially lower on a utility-adjusted basis than when evaluated on a purely financial basis. In a simple life-cycle model with no bequests, complete annuitization is welfare enhancing even for those individuals with much higher-than-average expected mortality rates, so long as administrative costs are sufficiently low. These findings have implications for policy toward annuitization, particularly as part of a reformed Social Security system.

JEL-codes: D91 H55 (search for similar items in EconPapers)
Date: 2002-10
New Economics Papers: this item is included in nep-ias
Note: AG PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Published as Brown, Jeffrey R. "Redistribution And Insurance: Mandatory Annuitization With Mortality Heterogeneity," Journal of Risk and Insurance, 2003, v70(1,Mar), 17-41.

Downloads: (external link)
http://www.nber.org/papers/w9256.pdf (application/pdf)

Related works:
Journal Article: Redistribution and Insurance: Mandatory Annuitization With Mortality Heterogeneity (2003)
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:nbr:nberwo:9256

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w9256

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().