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The Geometry of Life Annuities

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  • Geoffrey Kingston
  • John Piggott

Abstract

Straightforward geometry can be used to explain the role for life annuities in smoothing individual consumption during retirement. In the aggregate, there is a surprising analogy with a standard diagram from trade theory. That diagram takes careful account of the government revenues forgone when there is a move from tariffs to free trade. Here we find a similar geometric interpretation of the proceeds from deceased estates which need to be accounted for when comparing a no‐annuities economy with its annuitized counterpart. By the same token, there are considerable gains from opening up a market for life annuities, even after deceased estates are taken into account.

Suggested Citation

  • Geoffrey Kingston & John Piggott, 1999. "The Geometry of Life Annuities," Manchester School, University of Manchester, vol. 67(2), pages 187-191, March.
    • Handle: RePEc:bla:manchs:v:67:y:1999:i:2:p:187-191
    DOI: 10.1111/1467-9957.00141
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    Cited by:

    1. Fehr, Hans & Habermann, Christian, 2008. "Welfare effects of life annuities: Some clarifications," Economics Letters, Elsevier, vol. 99(1), pages 177-180, April.

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