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THE BEQUEST MOTIVE AND SINGLE PEOPLE’S DEMAND FOR LIFE ANNUITIES

Carlos Vidal-Melia () and Ana Lejárraga-García
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Ana Lejárraga-García: UNIVERSITY OF VALENCIA, SPAIN

Public Economics from University Library of Munich, Germany

Abstract: The main objective of this paper is to go deeper into the “annuity puzzle” by introducing the altruistic and strategic bequest motive and determining whether this really is a relevant factor affecting the theoretical decision to purchase life annuities. With this end in view we develop an optimization model based on that first put forward by Lejárraga et al. [2002], then add to it elements from other models such as Friedman and Warshawsky’s [1990] and Jousten’s [1998 & 2001] which include the bequest motive. We also analyse welfare by calculating the equivalent wealth in different contexts: the possibility of having access to an actuarially fair life annuity or programmed withdrawal market, the incorporation of so-called market imperfections, and the inclusion of the hypothesis that the individuals already have part of their wealth in pre-existing life annuities.

Keywords: Capitalization; Pension Funds; Phased Withdrawal; Retirement; Utility. (search for similar items in EconPapers)
JEL-codes: G23 H55 J26 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2004-05-17
Note: Type of Document - pdf; pages: 24
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