Annuities and individual welfare

• 成果类型: Article
• 署名作者: Davidoff, T; Brown, JR; Diamond, PA
• 署名单位: University of California System; University of California Berkeley; University of Illinois System; University of Illinois Urbana-Champaign; National Bureau of Economic Research; Massachusetts Institute of Technology (MIT)
• 刊物名称: AMERICAN ECONOMIC REVIEW
• ISSN/ISSBN: 0002-8282
• DOI: 10.1257/000282805775014281
• 发表日期: 2005
• 页码: 1573-1590
• 关键词: habit formation; life-insurance; demand; cycle

摘要

Advancing annuity demand theory, we present sufficient conditions for the optimality of full annuitization under market completeness which are substantially less restrictive than those used by Menahem E. Yaari (1965). We examine demand with market incompleteness, finding that positive annuitization remains optimal widely, but complete annuitization does not. How uninsured medical expenses affect demand for illiquid annuities depends critically on the timing of the risk. A new set of calculations with optimal consumption trajectories very different from available annuity income streams still shows a preference for considerable annuitization, suggesting that limited annuity purchases are plausibly due to psychological or behavioral biases.