Adverse selection in the annuity market and the role for social security

Roozbeh Hosseini

Research output: Contribution to journalArticlepeer-review

34 Scopus citations


I study the role of social security in providing insurance when there is adverse selection in the annuity market. I calculate welfare gain from mandatory annuitization in the social security system relative to a laissez-faire benchmark, using a model in which individuals have private information about their mortality. I estimate large heterogeneity in mortality using the Health and Retirement Study. Despite that, I find small welfare gain from mandatory annuitization. Social security has a large effect on annuity prices because it crowds out demand by high-mortality individuals. Welfare gain would have been significantly larger in the absence of this effect.

Original languageEnglish (US)
Pages (from-to)941-984
Number of pages44
JournalJournal of Political Economy
Issue number4
StatePublished - Aug 1 2015

ASJC Scopus subject areas

  • Economics and Econometrics


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