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http://ssrn.com/abstract=11002
 
 

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The Future of Old-Age Longevity: Competitive Pricing of Mortality Contingent Claims


Charles Mullin


Vanderbilt University - College of Arts and Science - Department of Economics

Tomas Philipson


University of Chicago; National Bureau of Economic Research (NBER)

Undated


Abstract:     
The future course of old-age mortality is of great importance to public sector expenditures in countries where old-age programs, such as Social Security and Medicare in the US, account for large fractions of the public budget. This paper argues that the competitive market prices of mortality contingent claims, such as annuities and life-insurance, contain information which allow one to infer the opinion of the market regarding the pace of the continued increase in old-age longevity. The paper develops methods to identify and estimate the mortality implicit in the market prices of such claims by identifying survival functions from prices of contracts that differ in their duration. Utilizing these methods, we provide estimates using cohort-specific prices of US term life insurance contracts in 1990-96 for individuals aged 60 in each calendar year. Our main finding is that the mortality patterns inferred from these prices indicate a continued decline in cohort-specific mortality at rates equal to or greater than recent historical trends; about a 5 percent reduction in relative terms in the mortality hazards per successive cohort.

JEL Classification: G22, I12

working papers series


Not Available For Download

Date posted: August 15, 1997  

Suggested Citation

Mullin, Charles and Philipson, Tomas, The Future of Old-Age Longevity: Competitive Pricing of Mortality Contingent Claims (Undated). Available at SSRN: http://ssrn.com/abstract=11002

Contact Information

Charles Mullin (Contact Author)
Vanderbilt University - College of Arts and Science - Department of Economics ( email )
Box 1819 Station B
Nashville, TN 37235
United States
Tomas J. Philipson
University of Chicago ( email )
Graduate School of Business
1101 East 58th Street
Chicago, 60637
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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