The American Risk and Insurance Association presents the Robert I. Mehr Award each year for the paper published ten years ago in The Journal of Risk and Insurance that has best stood the test of time. The evaluation of the articles is made by the editorial board of JRI.
The recipient of the 2013 Mehr Award was Jeffrey R. Brown at the University of Illinois, for “Redistribution and Insurance: Mandatory Annuitization with Mortality Heterogeneity“, JRI, Vol. 70, No. 1 (Mar., 2003), pp. 17-41.
This article examines the distributional implications of mandatory
longevity insurance when mortality heterogeneity exists in the population.
Previous research has demonstrated the significant financial
redistribution that occurs underalternative annuity programs in the
presence of differential mortality across groups. This article embeds that
analysis into a life-cycle framework that allows for an examination of
distributional effects on a utility-adjusted basis. It finds that the
degree of redistribution that occurs from the introduction of a mandatory
annuity program is substantially lower on a utility-adjusted basis than
when evaluated on a purely financial basis. In a simple life-cycle model
with no bequests, complete annuitization is welfare enhancing even for
those with higher-than-average expected mortality rates, so long as
administrative costs are sufficiently low. These findings have
implications for policy toward annuitization, particularly as part of a
reformed Social Security system.
The complete article can be found at http://www.jstor.org/stable/3520004.