Life-cycle modelling of bequests and its implications for annuity valuation

Reference : Life-cycle modelling of bequests and its implications for annuity valuation


	Document type :	Scientific journals : Article
	Discipline(s) :	Business & economic sciences : Economic systems & public economics
	To cite this reference:	http://hdl.handle.net/2268/17674

Title :	Life-cycle modelling of bequests and its implications for annuity valuation
Language :	English
Author, co-author :	Jousten, Alain [Université de Liège - ULiège > HEC-Ecole de gestion : UER > Théorie monétaire et macroéconomie >]
Publication date :	2001
Journal title :	Journal of Public Economics
Publisher :	Elsevier Science
Volume :	79
Pages :	149-177
Peer reviewed :	Yes (verified by ORBi)
Audience :	International
ISSN :	0047-2727
City :	Lausanne
Country :	Switzerland
Keywords :	[en] bequests ; annuities ; consumption function
Abstract :	[en] In this paper we introduce a linear bequest motive into a standard life-cycle model, both allowing for credit and annuity market imperfections. First, we characterize the consumption and wealth processes.We find that consumption is non-increasing in the linear bequest parameter for the simplest certainty case, but that the same is not true for life-span uncertainty. Second, we study the issue of annuity valuation. For a sufficiently strong bequest motive, the true value of an annuity is equal to the actuarial value. This invalidates a previous claim that, for imperfect annuity markets, it is close to the simple financial value.
Target :	Researchers ; Professionals
Permalink :	http://hdl.handle.net/2268/17674
DOI :	10.1016/S0047-2727(00)00099-2

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