- Author
- Year
- 2011
- Title
- Funded pensions and intergenerational and international risk sharing in general equilibrium
- Journal
- Journal of International Money and Finance
- Volume | Issue number
- 30 | 7
- Pages (from-to)
- 1516-1534
- Document type
- Article
- Faculty
- Faculty of Economics and Business (FEB)
- Institute
- Amsterdam School of Economics Research Institute (ASE-RI)
- Abstract
-
We explore intergenerational and international risk sharing in a general equilibrium multiple-country model with two-tier pensions systems. The exact design of the pension system is key for the way in which risks are shared over generations. The laissez-faire market solution fails to provide an optimal allocation because the young cannot share in the financial risks. However, the existence of wage-indexed bonds combined with a pension system with a fully funded second tier that pays defined wage-indexed benefits can reproduce the first best. If wage-indexed bonds are not available, mimicking the first best is not possible, except under special circumstances. We also explore whether national pension funds want to deviate from the first best by increasing domestic equity holdings. With wage-indexed bonds this incentive is absent, while there is indeed such an incentive when wage-indexed bonds do not exist.
- URL
- go to publisher's site
- Language
- English
- Persistent Identifier
- https://hdl.handle.net/11245/1.358309
Disclaimer/Complaints regulations
If you believe that digital publication of certain material infringes any of your rights or (privacy) interests, please let the Library know, stating your reasons. In case of a legitimate complaint, the Library will make the material inaccessible and/or remove it from the website. Please Ask the Library, or send a letter to: Library of the University of Amsterdam, Secretariat, Singel 425, 1012 WP Amsterdam, The Netherlands. You will be contacted as soon as possible.