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

John Ameriks

The Vanguard Group, Inc.

Andrew Caplin

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

Steven Laufer

Federal Reserve Board

Stijn Van Nieuwerburgh

New York University Stern School of Business, Department of Finance; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

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 )

P.O. Box 2600
MS V36
Valley Forge, PA 19482-2600
United States
610-503-5676 (Phone)

Andrew Caplin

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

269 Mercer Street
New York, NY 10003
United States
212-998-8950 (Phone)
212-995-3932 (Fax)

HOME PAGE: http://www.econ.nyu.edu/user/caplina/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Steven Laufer

Federal Reserve Board ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States
202-475-6608 (Phone)
202-728-5889 (Fax)

Stijn Van Nieuwerburgh (Contact Author)

New York University Stern School of Business, Department of Finance ( email )

44 West 4th Street
Suite 9-190
New York, NY 10012-1126
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

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