Stimulating Annuity Markets
33 Pages Posted: 1 Jul 2014
Date Written: May 30, 2014
We study the short-, medium-, and long-run implications of stimulating annuity markets in a dynamic general-equilibrium overlapping-generations model. We find that beneficial partial-equilibrium effects of stimulating annuity markets are counteracted by negative general-equilibrium repercussions. Balancing the positive partial-equilibrium and negative general-equilibrium forces we show that there exists some intermediate level of annuitization such that long-run welfare is maximized. Studying the transition to the optimal degree of annuitization shows that currently middle-aged individuals stand to gain most from the stimulation of annuity markets.
Keywords: Individual welfare, annuity markets, computable general equilibrium, overlapping generations
JEL Classification: C68, D91, J14, H55
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