TY - JOUR AU - Kotlikoff,Laurence J. AU - Shoven,John B. AU - Spivak,Avia TI - Annuity Markets, Savings, and the Capital Stock JF - National Bureau of Economic Research Working Paper Series VL - No. 1250 PY - 1987 Y2 - April 1987 UR - http://www.nber.org/papers/w1250 L1 - http://www.nber.org/papers/w1250.pdf N1 - Author contact info: Laurence J. Kotlikoff Department of Economics Boston University 270 Bay State Road Boston, MA 02215 Tel: 617/353-4002 Fax: 617/353-4001 E-Mail: kotlikoff@gmail.com John B. Shoven Department of Economics 579 Serra Mall at Galvez Street Stanford, CA 94305-6015 Tel: 650/723-3273 Fax: 650/723-8611 E-Mail: shoven@stanford.edu Avia Spivak M1 - published as Laurence J. Kotlikoff, John B. Shoven, Avia Spivak. "Annuity Markets, Savings, and the Capital Stock ," in Zvi Bodie, John B. Shoven, and David A. Wise, eds., "Issues in Pension Economics" University of Chicago Press (1987) AB - This article examines how the availability of annuities affects savings and inequality in economies in which neither private nor public pensions initially exist. The absence of widespread market or government annuity insurance is clearly descriptive of many less developed countries in the world today; it was also a characteristic of virtually all countries prior to World War II. The paper compares economies with perfect insurance with economies in which completely selfish parents and children pool longevity risk to their mutual advantage. The analysis of the latter economies takes into account the infinite sequence of risk sharing bargains of successive parents with their children. Such bargains affect current risk sharing between parents and child because they determine the welfare of current children when they become parents. Calculations based on the CBS utility function indicate that perfecting annuity insurance can significantly reduce national savings. Indeed, the insurance aspects of government pensions are potentially as important as underfunding government pensions in reducing national savings. ER -