We prove that for any incomplete market and any concave utilityfunction the marginal propensities to consume and to save are alwayspositive. Furthermore, we introduce a class of incomplete markets thatincludes almost all well known examples of market incompleteness infinance and macroeconomics....

This paper argues that observations of non-stationary choice behavior need notnecessarily imply specific properties of the individual’s discount function. As weshow, the observed “anomalies” in intertemporal choice can alternatively be explained by an individual’s perception of the risk...

A deferred annuity typically includes an option-like right for thepolicyholder. At the end of the deferment period, he may either choose toreceive annuity payouts, calculated based on a mortality table agreed to atcontract inception, or receive the accumulated capital as a lump sum.Considering...

Was the increase in income inequality in the US due to permanent shocks or merely to anincrease in the variance of transitory shocks? The implications for consumption and welfaredepend crucially on the answer to this question. We use CEX repeated cross-section data onconsumption and income to...

A pay-as-you-go (paygo) pension program may provide intergenerational pooling of risks toindividuals´ labor and capital income over the life cycle. By means of a model that providesilluminating closed form solutions, we demonstrate that the magnitude of the optimal paygoprogram and the nature...

We analyze the effect of enhanced annuities on an insurer engaging in individualunderwriting. We use a frailty model for the heterogeneity of the insured populationand model the individual underwriting by a random variable that positivelycorrelates with the corresponding frailty factor. For a...

Das Preis-Leistungs-Verhältnis herkömmlicher Rentenversicherungen steigt mitder Lebenserwartung des Versicherten. Derartige Produkte sind damit nur für Personen mit relativ hoher Lebenserwartung attraktiv. Der Nachteil für Versichertemit reduzierter Lebenserwartung wird durch steuerliche...

In comparing an immediate life annuity with a payout-equivalent investment fundpayout plan (self-annuitization), research to date has focused mainly on shortfallprobabilities of self-annuitization. As an exception, Schmeiser and Post (2005)propose a family strategy where the chances of...

This paper analyzes dynamic equilibrium risk sharing contracts between profit-maximizing intermediaries and a large pool of ex-ante identical agents that face idiosyncratic income uncertainty that makes them heterogeneous ex-post. In any given period, after having observed her income, the agent...

In this paper we document the importance of framing effects in the retirement savingsdecisions of college professors. Pensions in many post-secondary institutions are funded bya combination of an employer contribution and a mandatory employee contribution.Employees can also make tax-deferred...