The Joy of Giving or Assisted Living? Using Strategic Surveys to Separate Public Care Aversion from Bequest Motives

50 Pages Posted: 27 Apr 2007 Last revised: 8 Jun 2010

See all articles by John Ameriks

John Ameriks

The Vanguard Group, Inc.

Andrew Caplin

New York University (NYU) - Department of Economics; National Bureau of Economic Research (NBER)

Steven Laufer

Board of Governors of the Federal Reserve System

Stijn Van Nieuwerburgh

Columbia University Graduate School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); ABFER

Multiple version iconThere are 2 versions of this paper

Date Written: June 7, 2010

Abstract

The "annuity puzzle", conveying the apparently low interest of retirees in longevity insurance, is central to household finance. One possible explanation for low annuitization is ``public care aversion" (PCA), retiree aversion to simultaneously running out of wealth and being in need of long term care. Another possible explanation is an intentional bequest motive. To disentangle the relative importance of PCA and bequest motive, we estimate a structural model of the retirement phase using a novel survey instrument that includes hypothetical questions. We identify PCA as very significant and bequest motives that spread deep into the middle class. Our results highlight potential interest in annuities that make special allowance for long term care expenses.

Keywords: public care aversion, annuity puzzle, bequest, long-term care, survey methodology, household finance

JEL Classification: I10, D10, D91, G10

Suggested Citation

Ameriks, John and Caplin, Andrew and Laufer, Steven and Van Nieuwerburgh, Stijn, The Joy of Giving or Assisted Living? Using Strategic Surveys to Separate Public Care Aversion from Bequest Motives (June 7, 2010). Journal of Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=982674

John Ameriks

The Vanguard Group, Inc. ( email )

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Andrew Caplin

New York University (NYU) - Department of Economics ( email )

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Steven Laufer

Board of Governors of the Federal Reserve System ( email )

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Stijn Van Nieuwerburgh (Contact Author)

Columbia University Graduate School of Business ( email )

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HOME PAGE: http://https://www0.gsb.columbia.edu/faculty/svannieuwerburgh/

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