Inkmann, Joachim, Lopes, Paula and Michaelides, Alexander (2007) How deep is the annuity market participation puzzle? Discussion paper: UBS Paper 044, 593. Financial Markets Group, London School of Economics and Political Science, London, UK.
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Abstract
Using U.K. microeconomic data, we analyze the empirical determinants of voluntary annuity market demand. We find that annuity market participation increases with financial wealth, life expectancy and education and decreases with other pension income and a possible bequest motive for surviving spouses. We then show that these empirically-motivated determinants of annuity market participation have the same, quantitatively important, e¤ects in a life-cycle model of annuity demand, saving and portfolio choice. Moreover, reasonable preference parameters predict annuity demand levels comparable to the data, thereby questioning the conventional wisdom that limited annuity market participation is a puzzle to be explained.
| Item Type: | Monograph (Discussion Paper) |
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| Official URL: | http://fmg.lse.ac.uk |
| Additional Information: | © 2007 The Authors |
| Uncontrolled Keywords: | Annuities, Portfolio choice, Bequest motive |
| Library of Congress subject classification: | H Social Sciences > HF Commerce H Social Sciences > HG Finance H Social Sciences > HB Economic Theory |
| Journal of Economic Literature Classification System: | H - Public Economics > H0 - General > H00 - General E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E21 - Macroeconomics: Consumption; Saving; Aggregate Physical and Financial Consumer Wealth |
| Sets: | Research centres and groups > Financial Markets Group (FMG) Collections > Economists Online |
| Rights: | http://www.lse.ac.uk/library/rights/LSERO.htm |
| Identification Number: | 593 |
| URL: | http://eprints.lse.ac.uk/24488/ |
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