THE EFFECTS OF ANNUITIES, BEQUESTS, AND AGING IN AN OVERLAPPING GENERATIONS MODEL OF ENDOGENOUS GROWTH

We examine the effects of introducing actuarially fair annuity markers into an overlapping generations model of endogenous growth. The compl ete annuitisation of agents' wealth is not, in general, dynamically op timal; the degree of annuitisation that is dynamically optimal depends nonmonotonically on the expected length of retirement and on the pay- as-you-go social security tax rate. The government has an incentive to restrict the availability of actuarially fair annuities contracts, an d can often move the economy from a pay-as-you-go to a fully-funded so cial security system via voluntary contributions to a government spons ored, actuarially fair pension today accompanied by reductions in soci al security taxes tomorrow.