IDEAS home Printed from https://ideas.repec.org/p/arx/papers/2207.01536.html
   My bibliography  Save this paper

Time-consistent pension policy with minimum guarantee and sustainability constraint

Author

Listed:
  • Caroline Hillairet
  • Sarah Kaakai
  • Mohamed Mrad

Abstract

This paper proposes and investigates an optimal pair investment/pension policy for a pay-as-you-go (PAYG) pension scheme. The social planner can invest in a buffer fund in order to guarantee a minimal pension amount. The model aims at taking into account complex dynamic phenomena such as the demographic risk and its evolution over time, the time and age dependence of agents preferences, and financial risks. The preference criterion of the social planner is modeled by a consistent dynamic utility defined on a stochastic domain, which incorporates the heterogeneity of overlapping generations and its evolution over time. The preference criterion and the optimization problem also incorporate sustainability, adequacy and fairness constraints. The paper designs and solves the social planner's dynamic decision criterion, and computes the optimal investment/pension policy in a general framework. A detailed analysis for the case of dynamic power utilities is provided.

Suggested Citation

  • Caroline Hillairet & Sarah Kaakai & Mohamed Mrad, 2022. "Time-consistent pension policy with minimum guarantee and sustainability constraint," Papers 2207.01536, arXiv.org, revised Feb 2024.
    • Handle: RePEc:arx:papers:2207.01536
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/2207.01536
    File Function: Latest version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Peter P. Wakker, 2008. "Explaining the characteristics of the power (CRRA) utility family," Health Economics, John Wiley & Sons, Ltd., vol. 17(12), pages 1329-1344.
    2. Peter P. Wakker, 2008. "Explaining the characteristics of the power (CRRA) utility family," Health Economics, John Wiley & Sons, Ltd., vol. 17(12), pages 1329-1344, December.
    3. M. Musiela & T. Zariphopoulou, 2011. "Initial Investment Choice And Optimal Future Allocations Under Time-Monotone Performance Criteria," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 14(01), pages 61-81.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Franziska Tausch & Jan Potters & Arno Riedl, 2014. "An experimental investigation of risk sharing and adverse selection," Journal of Risk and Uncertainty, Springer, vol. 48(2), pages 167-186, April.
    2. Han Bleichrodt & Rogier J. D. Potter van Loon & Kirsten I. M. Rohde & Peter P. Wakker, 2013. "A Criticism of Doyle's survey of time preference: A correction regarding the CRDI and CADI families," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 8(5), pages 630-631, September.
    3. Syngjoo Choi & Jeongbin Kim & Eungik Lee & Jungmin Lee, 2022. "Probability Weighting and Cognitive Ability," Management Science, INFORMS, vol. 68(7), pages 5201-5215, July.
    4. Thomas Epper & Helga Fehr-Duda & Adrian Bruhin, 2011. "Viewing the future through a warped lens: Why uncertainty generates hyperbolic discounting," Journal of Risk and Uncertainty, Springer, vol. 43(3), pages 169-203, December.
    5. Ikefuji, M. & Laeven, R.J.A. & Magnus, J.R. & Muris, C.H.M., 2010. "Burr Utility," Discussion Paper 2010-81, Tilburg University, Center for Economic Research.
      • Ikefuji, M. & Laeven, R.J.A. & Magnus, J.R. & Muris, C.H.M., 2010. "Burr Utility," Other publications TiSEM fddee215-edea-4800-ba72-d, Tilburg University, School of Economics and Management.
    6. repec:cup:judgdm:v:8:y:2013:i:2:p:116-135 is not listed on IDEAS
    7. Aurélien Baillon & Zhenxing Huang & Asli Selim & Peter P. Wakker, 2018. "Measuring Ambiguity Attitudes for All (Natural) Events," Econometrica, Econometric Society, vol. 86(5), pages 1839-1858, September.
    8. Tesselaar, Max & Botzen, W.J. Wouter & Robinson, Peter J. & Aerts, Jeroen C.J.H. & Zhou, Fujin, 2022. "Charity hazard and the flood insurance protection gap: An EU scale assessment under climate change," Ecological Economics, Elsevier, vol. 193(C).
    9. Attema, Arthur E. & Brouwer, Werner B.F. & l’Haridon, Olivier & Pinto, Jose Luis, 2016. "An elicitation of utility for quality of life under prospect theory," Journal of Health Economics, Elsevier, vol. 48(C), pages 121-134.
    10. l'Haridon, Olivier & Malherbet, Franck & Pérez-Duarte, Sébastien, 2013. "Does bargaining matter in the small firms matching model?," Labour Economics, Elsevier, vol. 21(C), pages 42-58.
    11. Arthur E. Attema & Marieke Krol & Job Exel & Werner B. F. Brouwer, 2018. "New findings from the time trade-off for income approach to elicit willingness to pay for a quality adjusted life year," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 19(2), pages 277-291, March.
    12. Michele Garagnani, 2023. "The predictive power of risk elicitation tasks," Journal of Risk and Uncertainty, Springer, vol. 67(2), pages 165-192, October.
    13. de Castro, Luciano & Galvao, Antonio F. & Noussair, Charles N. & Qiao, Liang, 2022. "Do people maximize quantiles?," Games and Economic Behavior, Elsevier, vol. 132(C), pages 22-40.
    14. Teresa Backhaus, 2022. "Training in Late Careers - A Structural Approach," CRC TR 224 Discussion Paper Series crctr224_2022_382, University of Bonn and University of Mannheim, Germany.
    15. Muris, C.H.M., 2011. "Panel data econometrics and climate change," Other publications TiSEM 019be37c-ed20-4483-bebd-6, Tilburg University, School of Economics and Management.
    16. J.M.J. Delnoij & K.J.M. De Jaegher, 2016. "Competing first-price and second-price auctions," Working Papers 16-07, Utrecht School of Economics.
    17. Anna Conte & John D. Hey & Peter G. Moffatt, 2018. "Mixture models of choice under risk," World Scientific Book Chapters, in: Experiments in Economics Decision Making and Markets, chapter 1, pages 3-12, World Scientific Publishing Co. Pte. Ltd..
    18. Galama, T. & Hullegie, P. & Meijer, E. & Outcault, S., 2012. "Empirical evidence for decreasing returns to scale in a health capital model," Health, Econometrics and Data Group (HEDG) Working Papers 12/05, HEDG, c/o Department of Economics, University of York.
    19. Tamás Csermely & Alexander Rabas, 2016. "How to reveal people’s preferences: Comparing time consistency and predictive power of multiple price list risk elicitation methods," Journal of Risk and Uncertainty, Springer, vol. 53(2), pages 107-136, December.
    20. John Grable & Eun Jin Kwak & Martha Fulk & Aditi Routh, 2022. "A Simplified Measure of Investor Risk Aversion," Journal of Interdisciplinary Economics, , vol. 34(1), pages 7-34, January.
    21. Max Tesselaar & W. J. Wouter Botzen & Timothy Tiggeloven & Jeroen C. J. H. Aerts, 2023. "Flood insurance is a driver of population growth in European floodplains," Nature Communications, Nature, vol. 14(1), pages 1-14, December.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:2207.01536. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: http://arxiv.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.