Abstract
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 language | English (US) |
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Pages (from-to) | 941-984 |
Number of pages | 44 |
Journal | Journal of Political Economy |
Volume | 123 |
Issue number | 4 |
DOIs | |
State | Published - Aug 1 2015 |
ASJC Scopus subject areas
- Economics and Econometrics