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How deep is the annuity market participation puzzle?

Inkmann, Joachim, 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


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:
Additional Information: © 2010 OUP
Divisions: Economics
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HF Commerce
H Social Sciences > HG Finance
Date Deposited: 20 Mar 2011 14:48
Last Modified: 11 Jun 2024 03:42

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