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How deep is the annuity market participation puzzle?

Inkmann, Joachim and Lopes, Paula and Michaelides, Alexander (2011) How deep is the annuity market participation puzzle? Review of Financial Studies, 24 (1). pp. 279-319. ISSN 0893-9454

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Identification Number: 10.1093/rfs/hhq080

Abstract

Using microeconomic data for the United Kingdom, 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, effects in a life-cycle model of annuity and life insurance demand, saving, and portfolio choice. Moreover, reasonable preference parameters predict annuity demand levels comparable to the data. For stockholders, a strong bequest motive can simultaneously generate balanced portfolios and low annuity demand.

Item Type: Article
Official URL: http://rfs.oxfordjournals.org/
Additional Information: © 2010 OUP
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HF Commerce
H Social Sciences > HG Finance
Sets: Departments > Economics
Collections > Economists Online
Date Deposited: 20 Mar 2011 14:48
Last Modified: 24 Sep 2012 10:52
URI: http://eprints.lse.ac.uk/id/eprint/33362

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