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3 Ways U.S. Households' Life and Annuity Use Looks Weird

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Many economists think the way U.S. households use life insurance and annuities looks a little strange.

Most U.S. economists working today start with the “classical economic model.” That model implies that households should buy enough insurance now to maximize what they can consume later.

In the real world, U.S. households buy more of some insurance products than the classical model suggests, and they spend less on other products.

John Beshears, who teaches business administration at Harvard’s business school, and three colleagues look at some of those life and annuity puzzles in a new discussion of behavioral household finance. The discussion is part of an upcoming book on economics, the “First Handbook of Behavioral Economics, Volume 1.”

Beshears and his colleagues have published the discussion as a working paper, or formal draft, on the website of the National Bureau of Economic Research, behind a paywall.

A link to the discussion is available here.

For a look at three of the life and annuity puzzles described in the working paper, see the idea cards in the idea card gallery above.

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