An Exploration into the Annuity Puzzle: The Role of Health Risk, Lack of Liquidity of Annuities, and the Value of Life
0
조회
0
다운로드
6
인용
0
참고문헌
키워드
초록
This paper proposes a theory that has the potential to explain the annuity puzzle,i.e., the low demand for annuities in the U.S. and other countries. Specifically, this paper finds that the lack of liquidity of annuities, combined with adverse health shocks, can account for the low demand for annuities. Annuities are less attractive because the elderly find it hard to sell back annuities in case of large medical expenses due to serious health problems. In relation to this, the paper examines the role of the value of life, an intrinsic value attached to a life itself, in the annuity puzzle. If it means a lot to be alive, people would spend more on medical care and hence could demand annuities less. In a series of quantitative analyses,however, I find that the value of life does not reduce the annuity demand much,because more medical care motivated by the value of life can increase the life expectancy, which in turn can raise the annuity demand by increasing the expected payoffs of annuities.
Abstract
This paper proposes a theory that has the potential to explain the annuity puzzle,i.e., the low demand for annuities in the U.S. and other countries. Specifically, this paper finds that the lack of liquidity of annuities, combined with adverse health shocks, can account for the low demand for annuities. Annuities are less attractive because the elderly find it hard to sell back annuities in case of large medical expenses due to serious health problems. In relation to this, the paper examines the role of the value of life, an intrinsic value attached to a life itself, in the annuity puzzle. If it means a lot to be alive, people would spend more on medical care and hence could demand annuities less. In a series of quantitative analyses,however, I find that the value of life does not reduce the annuity demand much,because more medical care motivated by the value of life can increase the life expectancy, which in turn can raise the annuity demand by increasing the expected payoffs of annuities.
참고문헌 (22)
- Arias, E., "U.S. Decennial Life Tables for 1999-2001, United States Life Tables", National Vital Statistics Report, 57(1) (2008)
- Ashenfelter, O, "Measuring the Value of a Statistical Life: Problems and Prospects", Economic Journal, 116, pp.C10~C23 (2006)
- Brenner, H., "Long-Term Survival Rates of Cancer Patients Achieved by the End of the 20th Century: a Period Analysis", Lancet, 360, pp.1131~1135 (2002)
- Rational and Behavioral Perspectives on the Role of Annuities in Retirement Planning, "Brown, J. R.", NBER, ~, pp.WP 13537 (2007)
- Brown, J. R, "Joint Life Annuities and Annuity Demand by Married Couples", Journal of Risk and Insurance, 67(4), pp.527~553 (2000)
- Coleman, M. P., "Cancer Survival in Five Continents: a Worldwide Population-Based Study", Lancet Oncology, 9, pp.730~756 (2008)
- Cutler, D, "Your Money or Your Life: Strong Medicine for Americaʼs Health Care System" (2005), Oxford University Press
- Davidoff, T., "Annuities and Individual Welfare", American Economic Review, 95(5), pp.1573~1590 (2005)
- Di Nardi, M., "Why Do the Elderly Save? The Role of Medical Expenses", Journal of Political Economy, 118(1), pp.39~75 (2010)
- Dushi, I., "Household Annuitization Decisions: Simulations and Empirical Analysis", Journal of Pension Economics and Finance, 3(2), pp.109~143 (2004)
- Friedman, B, "The Cost of Annuities: Implications for Saving Behavior and Bequests", Quarterly Journal of Economics, 105(1), pp.135~154 (1990)
- Lifetime Annuities for U.S.: Evaluating the Efficacy of Policy Interventions in Life Annuity Markets, "Gentry, W. M", ~ (2006)
- Hall, R. E., "The Value of Life and the Rise in Health Spending", Quarterly Journal of Economics, 122(1), pp.29~72 (2007)
- Kotlikoff, L. J., "The Family as an Incomplete Annuities Market", Journal of Political Economy, 89(2), pp.372~391 (1981)
- Bequest Motives and the Annuity Puzzle, "Lockwood, L. M.", University of Chicago, ~ (2009)
- Mitchell, O. S., "New Evidence on the Moneyʼs Worth of Individual Annuities", American Economic Review, 89(5), pp.1299~1318 (1999)
- Pang, G., "Optimizing the Equity-Bond-Annuity Portfolio in Retirement: The Impact of Uncertain Health Expense", Insurance: Mathematics and Economics, 46, pp.198~209 (2010)
- Health Cost Risk and Optimal Retirement Provision: A Simple Rule for Annuity Demand, "Peijnenburg, K.", Tilburg University, ~, pp.Discussion Paper No. 2010-14 (2010)
- Health Shocks and the Demand for Annuities, "Sinclair, S. H", Congressional Budget Office, ~ (2004)
- The Impact of Health Status and Out-of-Pocket Medical Expenditures on Annuity Valuation, "Turra, C.", University of Michigan, ~, pp.Retirement Research Paper, WP 2004-086 (2004)
- Viscusi, W. K., "How to Value a Life", Journal of Economics and Finance, 32, pp.311~323 (2008)
- Yaari, M. E., "Uncertain Lifetime, Life Insurance, and the Theory of the Consumer", Review of Economic Studies, 32(2), pp.137~150 (1965)