This paper considers the question of why they annuity market is thin. A model is presented in which consumers have the option of purchasing annuities before discovering their survival probability; they can then recontract the initial choice after the resolution of this form of uncertainty. Is it shown that consumers purchase insurance against their own survival-probability-type at a very young age and do not undertake further transactions. The second half of the paper analyzes the effects of introducing future income uncertainty in this framework and investigates the trade off between insurance motive and portfolio flexibility. We argue that a natural separation emerges between the insurance choices made by employees and self employed individuals, based on the possibility of signing income-contingent contracts.
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