We show that even incomplete public insurance can crowd out private insurance demand. We estimate that Medicaid could explain the lack of private long-term care insurance for about two-thirds of the wealth distribution, even if no other factors limited the market's size. Yet Medicaid provides incomplete consumption smoothing for most individuals. Medicaid's crowd-out effect stems from the large implicit tax (about 60–75 percent for a median-wealth individual) that Medicaid imposes on private insurance. An implication is that public policies designed to stimulate the private insurance market will have limited efficacy as long as Medicaid's large implicit tax remains.

This manuscript is a “work of the United States Government ” within the meaning of the Copyright Act, 17 U.S.C. § 101. As such, the manuscript is not entitled to copyright protection, 17 U.S.C. § 105. Accordingly, the manuscript is in the public domain as a matter of law.

Advancing annuity demand theory, we present sufficient conditions for the optimality of full annuitization under market completeness which are substantially less restrictive than those used by Menahem E. Yaari (1965). We examine demand with market incompleteness, finding that positive annuitization remains optimal widely, but complete annuitization does not. How uninsured medical expenses affect demand for illiquid annuities depends critically on the timing of the risk. A new set of calculations with optimal consumption trajectories very different from available annuity income streams still shows a preference for considerable annuitization, suggesting that limited annuity purchases are plausibly due to psychological or behavioral biases.

Why Don’t People Insure Late-Life Consumption? A Framing Explanation of the Under-Annuitization Puzzle by Jeffrey R. Brown, Jeffrey R. Kling, Sendhil Mullainathan and Marian V. Wrobel. Published in volume 98, issue 2, pages 304-09 of American Economic Review, May 2008

New Evidence on the Money's Worth of Individual Annuities by Olivia S. Mitchell, James M. Poterba, Mark J. Warshawsky and Jeffrey R. Brown. Published in volume 89, issue 5, pages 1299-1318 of American Economic Review, December 1999

Endowment payouts have become an increasingly important component of universities' revenues in recent decades. We study how universities respond to financial shocks to endowments and thus shed light on a number of existing models of endowment behavior. Endowments actively reduce payouts relative to their stated payout policies following negative, but not positive, shocks. This asymmetric behavior is consistent with “endowment hoarding,” especially among endowments whose current value is close to the benchmark value at the start of the university president's tenure. We also document the effect of negative endowment shocks on university operations, such as personnel cuts.