Demand for private annuities and social security: consequences to individual wealth
Autor (es)
Sánchez Romero, MiguelEntidad
UAM. Departamento de Análisis Económico, Teoría Económica e Historia EconómicaEditor
Universidad Autónoma de Madrid, Departamento de Análisis Económico, Teoría Económica e Historia EconómicaFecha de edición
2006Serie/Núm.
Economic analysis working papers series. 07/2006ISSN
1885-6888Materias
Actuarially fair funded social security; Crowding out effect; Public and private wealth profiles; EconomíaResumen
This paper focuses on comparing public and private individual wealth over the life-cycle,
when individuals face an uncertain length of life. We also analyze how a fully funded and actuarially
fair Social Security affects the desire to annuitize private wealth. Within this framework,
we find that a social security system can contribute to reaching a higher national wealth,
even when the economy is composed of selfish individuals. Thus, by means of some simulations
we obtain the result that a payroll tax of 6 percent increases individual wealth up to 17
percent. This increment, however, is obtained under the assumption that insurance companies
offer fair annuities. On the contrary, under an unfair private annuity market, individual wealth
can decrease around 10 percent for the same payroll tax.
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