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Illiquid Life Annuities

d'Albis, Hippolyte and Etner, Johanna (2016): Illiquid Life Annuities. Forthcoming in:

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Abstract

In this article, we consider illiquid life annuity contracts and show that they may be preferred to those illustrated by Yaari (1965). In an overlapping-generation economy, liquid life annuities are demanded only if the equilibrium is dynamically inefficient. Conversely, an equilibrium displaying a positive demand for illiquid life annuities is efficient. In this latter case, the welfare at steady-state is larger if illiquid life annuity contracts are available.

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