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Welfare Effects of Developing the Reverse Mortgage Market in China: An Individual and Social Perspective

Welfare Effects of Developing the Reverse Mortgage Market in China: An Individual and Social... doi 10.1515/apjri-2013-0012 APJRI 2014; 8(1): 27–55 Featured Article Minan Huang*, Bingzheng Chen, and Yinglu Deng Welfare Effects of Developing the Reverse Mortgage Market in China: An Individual and Social Perspective Abstract: The increasing aging population and social security insufficiency have become serious problems in China. Some developed countries, such as the U.S., Canada, and Japan, have developed reverse mortgage markets as solutions for the aging problem. In this article, a theoretical analysis of the welfare and asset allocation effects from introducing a reverse mortgage market into China, with the overlapping generation model and parameters from Chinese factors, was carried out. The results show that the introduction of a reverse mortgage market improved individual and social welfare. It provides more income for both the older and the younger generations. For the older generation, this can reduce the burden on social security; for the younger generation, this can smooth out lifetime consumption for the individual. By making comparisons among differ- ent scenarios, this article shows that the welfare effects from a reverse mortgage market would increase with the aging level of society. Keywords: reverse mortgage, overlapping generation model, asset allocation, social welfare *Corresponding author: Minan Huang, Department of Finance, School of http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Asia-Pacific Journal of Risk and Insurance de Gruyter

Welfare Effects of Developing the Reverse Mortgage Market in China: An Individual and Social Perspective

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Publisher
de Gruyter
Copyright
Copyright © 2011–2019 by Walter de Gruyter GmbH
ISSN
2153-3792
DOI
10.1515/apjri-2013-0012
Publisher site
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Abstract

doi 10.1515/apjri-2013-0012 APJRI 2014; 8(1): 27–55 Featured Article Minan Huang*, Bingzheng Chen, and Yinglu Deng Welfare Effects of Developing the Reverse Mortgage Market in China: An Individual and Social Perspective Abstract: The increasing aging population and social security insufficiency have become serious problems in China. Some developed countries, such as the U.S., Canada, and Japan, have developed reverse mortgage markets as solutions for the aging problem. In this article, a theoretical analysis of the welfare and asset allocation effects from introducing a reverse mortgage market into China, with the overlapping generation model and parameters from Chinese factors, was carried out. The results show that the introduction of a reverse mortgage market improved individual and social welfare. It provides more income for both the older and the younger generations. For the older generation, this can reduce the burden on social security; for the younger generation, this can smooth out lifetime consumption for the individual. By making comparisons among differ- ent scenarios, this article shows that the welfare effects from a reverse mortgage market would increase with the aging level of society. Keywords: reverse mortgage, overlapping generation model, asset allocation, social welfare *Corresponding author: Minan Huang, Department of Finance, School of

Journal

Asia-Pacific Journal of Risk and Insurance – de Gruyter

Published: Dec 14, 2013

Keywords: reverse mortgage

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