Annuitization and aggregate mortality risk

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<subfield code="a">It is well established that annuities can fully diversify idiosyncratic mortality risks. However, survival rates at the cohort level are changing, raising the question what is the scope of annuities in the presence of aggregate mortality risk? In an overlapping generations setting, we show that risk free annuities exist, but offer a return below the (fair) certainty equivalent return, and agents do not fully annuitize their savings. Higher aggregate mortality risk increases savings and thus the mean level of the capital stock. This lowers the mean rate of return on capital, the survival premium on annuities and the share of individual savings in annuities.</subfield>
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<subfield code="a">Gestsson, Marias H. </subfield>
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<subfield code="t">The Journal of risk and insurance</subfield>
<subfield code="d">Nueva York : The American Risk and Insurance Association, 1964-</subfield>
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<subfield code="g">01/03/2021 Volumen 88 Número 1 - marzo 2021 , p. 79-99</subfield>
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