Too Risk Averse to Purchase Insurance? A Theoretical Glance at the Annuity Puzzle
نویسندگان
چکیده
We show that, as soon there exists a positive bequest motive, sufficiently risk averse individuals should not purchase annuities. This suggests therefore a new explanation for the low level of annuitization, which is valid even if one assumes perfect markets. A model calibration accounting for temporal risk aversion generates an optimal level of annuitization of only 25% of the total savings.
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