Stimulating Annuity Markets

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

Suggested Citation: Suggested Citation

Heijdra, Ben J. and Mierau, Jochen O. and Trimborn, Timo, Stimulating Annuity Markets (May 30, 2014). Netspar Discussion Paper No. 05/2014-018, Available at SSRN: https://ssrn.com/abstract=2460687. or http://dx.doi.org/10.2139/ssrn.2460687