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

• Autores: Roozbeh Hosseini
• Localización: Journal of Political Economy, ISSN-e 1537-534X, Vol. 123, Nº. 4, 2015, págs. 941-984
• Idioma: inglés
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• Resumen

  • 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