Adverse selection in the annuity market and the role for social security

Roozbeh Hosseini

Research output: Contribution to journalArticle

12 Citations (Scopus)

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 languageEnglish (US)
Pages (from-to)941-984
Number of pages44
JournalJournal of Political Economy
Volume123
Issue number4
DOIs
StatePublished - Aug 1 2015

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Social security
Adverse selection
Welfare gains
Annuities
Mortality
Annuitization
Benchmark
Social security system
Private information
Laissez-faire
Crowd-out
Health and Retirement Study
Insurance

ASJC Scopus subject areas

  • Economics and Econometrics

Cite this

Adverse selection in the annuity market and the role for social security. / Hosseini, Roozbeh.

In: Journal of Political Economy, Vol. 123, No. 4, 01.08.2015, p. 941-984.

Research output: Contribution to journalArticle

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