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Survival Pessimism and the Demand for Annuities / Cormac O'Dea, David Sturrock.
- Format:
- Book
- Author/Creator:
- O'Dea, Cormac.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w27677.
- NBER working paper series no. w27677
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2020.
- Summary:
- The "annuity puzzle" refers to the fact that annuities are rarely purchased despite the longevity insurance they provide. Most explanations for this puzzle assume that individuals have accurate expectations about their future survival. We provide evidence that individuals misperceive their mortality risk, and study the demand for annuities in a setting where annuities are priced by insurers on the basis of objectively-measured survival probabilities but in which individuals make purchasing decisions based on their own subjective survival probabilities. Subjective expectations have the capacity to explain significant rates of non-annuitization, yielding a quantitatively important explanation for the annuity puzzle.
- Notes:
- Print version record
- August 2020.
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