TY - JOUR AU - Finkelstein,Amy AU - Poterba,James AU - Rothschild,Casey TI - Redistribution by Insurance Market Regulation: Analyzing a Ban on Gender-Based Retirement Annuities JF - National Bureau of Economic Research Working Paper Series VL - No. 12205 PY - 2006 Y2 - May 2006 UR - http://www.nber.org/papers/w12205 L1 - http://www.nber.org/papers/w12205.pdf N1 - Author contact info: Amy Finkelstein Department of Economics MIT E52-274C 50 Memorial Drive Cambridge, MA 02142 Tel: 617/253-4149 Fax: 617/868-2742 E-Mail: afink@mit.edu James M. Poterba Department of Economics MIT, E52-350 50 Memorial Drive Cambridge, MA 02142-1347 Tel: 617/253-6673 Fax: 617/258-7804 E-Mail: poterba@nber.org Casey Rothschild Middlebury College Department of Economics Warner Hall 503 Middlebury, VT 05753 E-Mail: crothsch@wellesley.edu M2 - featured in NBER digest on 2006-05-08 AB - This paper shows how models of insurance markets with asymmetric information can be calibrated and solved to yield quantitative estimates of the consequences of government regulation. We estimate the impact of restricting gender-based pricing in the United Kingdom retirement annuity market, a market in which individuals are required to annuitize tax-preferred retirement savings but are allowed considerable choice over the annuity contract they purchase. After calibrating a lifecycle utility model and estimating a model of annuitant mortality that allows for unobserved heterogeneity, we solve for the range of equilibrium contract structures with and without gender-based pricing. Eliminating gender-based pricing is generally thought to redistribute resources from men to women, since women have longer life expectancies. We find that allowing insurers to offer a menu of contracts may reduce the amount of redistribution from men to women associated with gender-blind pricing requirements to half the level that would occur if insurers were required to sell a single pre-specified policy. The latter "one policy" scenario corresponds loosely to settings in which governments provide compulsory annuities as part of their Social Security program. Our findings suggest that recognizing the endogenous structure of insurance contracts is important for analyzing the economic effects of insurance market regulations. More generally, our results suggest that theoretical models of insurance market equilibrium can be used for quantitative policy analysis, not simply to derive qualitative findings. ER -