Intergenerational Risk Sharing, Stability and Optimality of Alternative Pension Systems

Arbeitspapier

In an analysis of the risk-sharing properties of different types of pension systems, we show that only a fixed-fee pay-as-you go (PAYG) pension systems can provide intergenerational risk sharing for living individuals. Under some circumstances, however, other PAYG pension systems can enhance the expected welfare of all generations by reducing intergenerational income variability. We derive conditions for this to occur. We also analyze the stability of actuarially fair PAYG pension systems. It is shown that if an actuarially fair pension with a non-balanced budget system is dynamically stable, its accumulated surpluses will converge to the same fund as in a fully funded system. We also show that the welfare loss due to labor market distortions will, surprisingly, increase if the implicit marginal return in a compulsory system is raised above the average return.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IUI Working Paper ; No. 493

Classification and Topics

• Classification: Wirtschaft ; National Government Expenditures and Related Policies: General ; Social Security and Public Pensions ; National Budget, Deficit, and Debt: General
• Subject: Pension systems ; Pay-as-you-go ; Intergenerational

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Hassler, John ; Lindbeck, Assar
• Event: Veröffentlichung
• (who): The Research Institute of Industrial Economics (IUI)
• (where): Stockholm
• (when): 1997

Further information

• Handle: http://hdl.handle.net/10419/94908
• Last update: 10.03.2025, 11:44 AM CET