Uncertain lifetimes and the welfare enhancing properties of annuity markets and social security

Zvi Eckstein*, Martin Eichenbaum, Dan Peled

*Corresponding author for this work

Research output: Contribution to journalArticle

62 Scopus citations

Abstract

This paper explores the implications of social security programs and annuity markets through which agents, who are characterized by different distributions of length of lifetime, share death-related risks. When annuity markets operate, a non-discriminatory social security program affects only the intragenerational allocation of resources. In the absence of private information regarding individual survival probabilities, such a program will lead to a non-optimal intragenerational allocation of resources. However, the presence of adverse selection considerations gives rise to a Pareto improving role for a mandatory non-discriminatory social security program.

Original languageEnglish (US)
Pages (from-to)303-326
Number of pages24
JournalJournal of Public Economics
Volume26
Issue number3
DOIs
StatePublished - Apr 1985

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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