Retirement Policy and Annuity Market Equilibria: Evidence from Chile / Gastón Illanes, Manisha Padi.

Format:

Book

Author/Creator:

Illanes, Gastón.

Contributor:

National Bureau of Economic Research.

Padi, Manisha.

Series:

Working Paper Series (National Bureau of Economic Research) no. w26285.

NBER working paper series no. w26285

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Retirement Policy and Annuity Market Equilibria

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2019.

Summary:

Retirement policy has indirect effects on its beneficiaries, through the "crowd-out" or "crowd-in" of insurance markets. We study how retirement policy in Chile, which limits the drawdown of retirement assets but otherwise does not provide or require fixed income in retirement, results in more than 60% of eligible retirees purchasing private annuities at low prices. We estimate a demand model to show that replacing this voluntary policy with partial mandatory annuitization and removing limits on drawdowns causes the private annuity market to partially unravel. Under our model, this reform leads to a welfare increase equivalent to US$4,000 of additional pension savings on average, but welfare effects are heterogenous and many retirees would be harmed due to the higher prices of private annuities. Our results highlight the importance of considering the impact of policy reforms on the equilibria of related markets.

Notes:

Print version record

September 2019.