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The Distribution of Wealth and Welfare in the Presence of Incomplete Annuity Markets

Zvi Eckstein¹; Martin S. Eichenbaum²; Dan Peled²

¹ Yale University · ² Carnegie Mellon University

This paper examines the implications of the absence of complete annuity markets on the distribution of wealth and welfare of agents whose saving decisions are obtained under uncertainty regarding the length of their life. The absence of annuities is shown to yield a unique nondegenerate intragenerational distribution of wealth, which is fully characterized. This characterization is then used to evaluate the Pareto desirability of an annuity system. Alternative welfare criteria that can be used when the proposed change has differential impacts on the initial state of subsequent generations are considered.

DOI

10.2307/1884379

Volume

100 (3)

Pages

789

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