When entering retirement most people face the decision whether they would like their defined contribution account balance paid as a lump sum or to annuitize the amount. The fact that people tend to choose the lump sum even if economic reasons suggest not to is called the annuity puzzle. In a...

This paper uses stochastic simulations on calibrated models to assess the optimal degree of reliance on funded pensions and on a particular type of unfunded (PAYG) pension. Surprisingly little is known about the optimal split between funded and unfunded systems when there are sources of...

This Paper uses stochastic simulations on calibrated models to assess the steady state impact of different pension arrangements in an environment where financial markets are less than perfect. Surprisingly little is known about the optimal split between funded and unfunded systems when there are...

Using U.K. microeconomic data, we analyze the empirical determinants of voluntary annuity market demand. We find that annuity market participation increases with financial wealth, life expectancy and education and decreases with other pension income and a pos- sible bequest motive for surviving...

We study the life cycle of portfolio allocation following for 15 years a large random sample of Norwegian households using error-free data on all components of households’ investments drawn from the Tax Registry. Both, participation in the stock market and the portfolio share in stocks, have...

It is well known that over the next few decades there will be significant changes in the demographic structures of nearly all developed countries; in the absence of massive immigration, or of catastrophic new fatal illnesses, by the middle of the next century the ratio of people of working age...

In this paper we perform simulations with a stylized model of Germany and the United Kingdom to show which generations might be direct gainers, and which losers, from a transition to funded state pensions. We estimate what the structure of inter-generational bequests would need to be in a...

The empirical evidence on rational inattention lags far behind the theoretical developments: micro evidence on the most immediate consequence of observation costs - the infrequent observation of state variables - is not available in standard datasets. We contribute to filling the gap with two...

This Paper first documents the evolution of the cross-sectional income and consumption distribution in the US in the past 25 years. Using data from the Consumer Expenditure Survey we find that a rising income inequality has not been accompanied by a corresponding rise in consumption inequality....