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The desirability of pay-as-you-go pensions when relative consumption matters and returns are stochastic

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  • Bilancini, Ennio
  • D’Antoni, Massimo

Abstract

Under concerns for relative consumption a PAYG system becomes more attractive because it insures pensioners against the risk of being outperformed, but it becomes potentially less effective in hedging the risks associated with financial markets. The net effect is ambiguous.

Suggested Citation

  • Bilancini, Ennio & D’Antoni, Massimo, 2012. "The desirability of pay-as-you-go pensions when relative consumption matters and returns are stochastic," Economics Letters, Elsevier, vol. 117(2), pages 418-422.
    • Handle: RePEc:eee:ecolet:v:117:y:2012:i:2:p:418-422
    DOI: 10.1016/j.econlet.2012.06.026
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    Cited by:

    1. Westerhout, Ed & Meijdam, Lex & Ponds, Eduard & Bonenkamp, Jan, 2022. "Should we revive PAYG? On the optimal pension system in view of current economic trends," European Economic Review, Elsevier, vol. 148(C).
    2. Aronsson, Thomas & Mannberg, Andrea, 2015. "Relative consumption of housing: Marginal saving subsidies and income taxes as a second-best policy?," Journal of Economic Behavior & Organization, Elsevier, vol. 116(C), pages 439-450.
    3. Bruno Chiarini & Paolo Piselli, 2012. "Equilibrium earning premium and pension schemes: The long-run macroeconomic effects of the union," Discussion Papers 2_2012, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy.

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    More about this item

    Keywords

    Pay-as-you-go pensions; Fully funded pensions; Relative consumption; Risk aversion; Relativity;
    All these keywords.

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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