Generational Accounting, Solidarity and Pension Losses
AbstractThe creeping stock market collapse eroded the wealth of funded pension systems. This led to political tensions between generations due to the fuzzy definition of property rights on the pension funds wealth. We argue that this problem can best be resolved by the introduction of generational accounts. Using modern portfolio and consumption planning theory we show that the younger generations should have the higher equity exposure due to their human capital. Capital losses should be distributed smoothly over lifetime consumption. When stock markets are depressed equity should be bought, savings and consumption should be scaled down equiproportionally, and retirement should be postponed. Portfolio investment restrictions are quite costly.
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Bibliographic InfoArticle provided by Springer in its journal De Economist.
Volume (Year): 154 (2006)
Issue (Month): 1 (03)
Contact details of provider:
Web page: http://www.springerlink.com/link.asp?id=100260
Pension funds; generational accounts; portfolio choice; Life cycle Models; D91; G11; G23;
Other versions of this item:
- de Vries, Casper G & Teulings, Coen N, 2004. "Generational Accounting, Solidarity and Pension Losses," CEPR Discussion Papers 4209, C.E.P.R. Discussion Papers.
- Teulings, Coen & de Vries, Casper G., 2003. "Generational Accounting, Solidarity and Pension Losses," IZA Discussion Papers 961, Institute for the Study of Labor (IZA).
- E20 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
- G20 - Financial Economics - - Financial Institutions and Services - - - General
- G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
- J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Private Pensions
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