Social security privatization with elastic labor supply and second-best taxes
In: NBER working paper series 11101
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In: NBER working paper series 11101
In: NBER working paper series 11038
In: NBER working paper series 9845
In: NBER working paper series 8732
In: Working paper series 9412
In: NBER working paper series 8262
In: The Geneva risk and insurance review, Band 45, Heft 2, S. 94-103
ISSN: 1554-9658
In: Journal of Monetary Economics, Band 57, Heft 5, S. 620-621
In: Journal of Monetary Economics, Band 53, Heft 7, S. 1493-1508
In: NBER Working Paper No. w11038
SSRN
In: American economic review, Band 94, Heft 2, S. 176-181
ISSN: 1944-7981
In: NBER Working Paper No. w8259
SSRN
In: Risk Aspects of Investment-Based Social Security Reform, S. 91-112
In: American economic review, Band 111, Heft 8, S. 2377-2416
ISSN: 1944-7981
Most individual life insurance policies lapse, with lapsers cross-subsidizing non-lapsers. We show that policies and lapse patterns predicted by standard rational expectations models are the opposite of those observed empirically. We propose two behavioral models consistent with the evidence: (i) consumers forget to pay premiums and (ii) consumers understate future liquidity needs. We conduct two surveys with a large insurer. New buyers believe that their own lapse probabilities are small compared to the insurer's actual experience. For recent lapsers, forgetfulness accounts for 37.8 percent of lapses while unexpected liquidity accounts for 15.4 percent. (JEL D91, G22, G52)
In: American economic review, Band 105, Heft 11, S. 3273-3320
ISSN: 1944-7981
The conventional wisdom since Yaari (1965) is that households without a bequest motive should fully annuitize their investments. Numerous frictions do not break this sharp result. We modify the Yaari framework by allowing a household's mortality risk itself to be stochastic due to health shocks. A lifetime annuity still helps to hedge longevity risk. But the annuity's remaining present value is correlated with medical costs, such as those for nursing home care, thereby reducing annuity demand, even without ad-hoc liquidity constraints. We find that most households should not hold a positive level of annuities, and many should hold negative amounts. (JEL D14, D82, G23, I12, J14, J26)