神戸大学金融研究会

16:00 ～ 17:30 (4:00pm-5:30pm )

論題
Topic

Price Elasticity of Demand for Reverse Mortgage in Korea (by Junseok Byun and Keunkwan Ryu)

報告者
Speaker

Keunkwan RYU (Department of Economics, Seoul National University / 神戸大学経済経営研究所)

概要
Abstract

We estimate the price elasticity of demand for reverse mortgage in Korea by combining two ideas. First, institution generates exogenous variation in "actuarially fair price" across months after birth (MaB) given years after birth (YaB). The monthly payment increases as one ages and thus faces a shorter residual life expectancy. Only when months after birth change by an integer multiple of 12, though, the monthly payment amount is adjusted on an annual basis. The resulting "effective price" is monotonically increasing as MaB (in fact months after birth mod 12) increases from 0 toward 11 until it is reset to be an actuarially fair price at MaB of 0. Price variation across MaB's allows us to identify the price elasticity of demand where a discrete and abrupt jump in price when MaB changes from 11 to 12 (reset to zero) helps identifying the price effect. Second, it is a common knowledge that the monthly payment is adjusted every 12 months, resulting in an anticipated price cut. Faced with anticipated price decrease, one tends to substitute future consumption at a lower price for the current consumption at a higher price (time effect). We identify the time effect separately by using within MaB variation in demand. In the end, by combining between MaB and within MaB variations in demand, we identify price elasticity of demand after stripping off the time effect.