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Betting on a Long Life – the Role of Subjective Life Expectancy in the Demand for Private Pension Insurance of German Households

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Dörr, U., Schulte, K. Betting on a Long Life – the Role of Subjective Life Expectancy in the Demand for Private Pension Insurance of German Households. Journal of Contextual Economics – Schmollers Jahrbuch, 132(2), 233-263. https://doi.org/10.3790/schm.132.2.233
Dörr, Ulrike and Schulte, Katharina "Betting on a Long Life – the Role of Subjective Life Expectancy in the Demand for Private Pension Insurance of German Households" Journal of Contextual Economics – Schmollers Jahrbuch 132.2, 2012, 233-263. https://doi.org/10.3790/schm.132.2.233
Dörr, Ulrike/Schulte, Katharina (2012): Betting on a Long Life – the Role of Subjective Life Expectancy in the Demand for Private Pension Insurance of German Households, in: Journal of Contextual Economics – Schmollers Jahrbuch, vol. 132, iss. 2, 233-263, [online] https://doi.org/10.3790/schm.132.2.233

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Betting on a Long Life – the Role of Subjective Life Expectancy in the Demand for Private Pension Insurance of German Households

Dörr, Ulrike | Schulte, Katharina

Journal of Contextual Economics – Schmollers Jahrbuch, Vol. 132 (2012), Iss. 2 : pp. 233–263

12 Citations (CrossRef)

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Author Details

Ulrike Dörr, Christian-Albrechts-Universität zu Kiel, Wirtschafts- und Sozialwissenschaftliche Fakultät, Institut für VWL, Olshausenstraße 40, 24118 Kiel.

Katharina Schulte, Christian-Albrechts-Universität zu Kiel, Institut für Volkswirtschaftslehre, Wilhelm-Seelig-Platz 1, 24118 Kiel.

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Abstract

With a view to investigating the presence of adverse selection in the private pension insurance market, we analyze determinants of private pension insurance uptake of German households. Using the SAVE 2005 survey data on savings and old-age provision, we estimate a probit model of insurance holdings. We find that subjective life expectancy is positively related with the probability of having supplementary private pension insurance. This indicates that the German private pension insurance market is in fact characterized by adverse selection. As expected, pre-existing entitlements to benefits from the public pension system tend to be a substitute to private insurance. Furthermore, financial literacy enhances the uptake of private pension insurance. We also find evidence for a bequest motive in old-age provision, but see no indication for pooling longevity risk within couples.