Abstract
The market for private life annuities is characterised by adverse selection; that is, contracts offer lower than fair payoffs to individuals with low life expectancy. Moreover, longevity and income have been found to be positively correlated. We formulate an optimum income taxation model that incorporates these facts and discuss the conditions under which a linear tax on annuity payoffs, which raises more revenues from long-living individuals than from short-living, can serve as an instrument for redistribution. Further, we consider a nonlinear tax on annuity payoffs, and find that it can be employed to correct the distortion of the rate of return caused by asymmetric information.
| Original language | English |
|---|---|
| Pages (from-to) | 285-303 |
| Journal | Social Choice and Welfare |
| Volume | 30 |
| Issue number | 2 |
| DOIs | |
| Publication status | Published - Feb 2008 |
Fields of science
- 405002 Agricultural economics
- 502 Economics
- 502001 Labour market policy
- 502002 Labour economics
- 502003 Foreign trade
- 502009 Corporate finance
- 502010 Public finance
- 502012 Industrial management
- 502013 Industrial economics
- 502018 Macroeconomics
- 502020 Market research
- 502021 Microeconomics
- 502025 Econometrics
- 502027 Political economy
- 502039 Structural policy
- 502042 Environmental economics
- 502046 Economic policy
- 502047 Economic theory
- 504014 Gender studies
- 506004 European integration
- 507016 Regional economy
- 303010 Health economics