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Optimal Sharing of Labor Productivity Risks and Mix of Pay-As-You-Go and Savings

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Author Info
Debora Kusmerski Bilard () (University of Amsterdam)
Abstract

This paper addresses two related issues: the optimal intergenerational sharing of labor productivity risks, through a Pay-As-You-Go (PAYG) social security with contingent rates of benefits and contributions, and the optimal combination of PAYG and funded savings in a small open economy. It shows that partial contingency of the social security on the labor productivity is ex ante optimal, when the interest rate is above the expected growth rate of the economy, and when the government has a lifetime perspective of the risk exposure. In addition, the government may induce a higher saving rate, due to the expected lower PAYG return and the household's desire of smoothing consumption over time.

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Publisher Info
Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 08-066/1.

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Date of creation: 14 Jul 2008
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Handle: RePEc:dgr:uvatin:20080066

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Web page: http://www.tinbergen.nl/

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Related research
Keywords: intergenerational risk sharing; PAYG social security; household's savings;

Find related papers by JEL classification:
H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving

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  1. Richard Kohl & Paul O'Brien, 1998. "The Macroeconomics of Ageing, Pensions and Savings: A Survey," OECD Economics Department Working Papers 200, OECD, Economics Department. [Downloadable!]
  2. Roger H. Gordon & Hal R. Varian, 1985. "Intergenerational Risk Sharing," NBER Working Papers 1730, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Henning Bohn, 2004. "Intergenerational Risk Sharing and Fiscal Policy," 2004 Meeting Papers 22, Society for Economic Dynamics. [Downloadable!]
  4. Demange, G., 2000. "On Optimality of Intergenerational Risk Sharing," DELTA Working Papers 2000-05, DELTA (Ecole normale supérieure).
  5. Antonio Rangel & Richard Zeckhauser, 1999. "Can Market and Voting Institutions Generate Optimal Intergenerational Risk Sharing?," NBER Working Papers 6949, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  6. Enders, Walter & Lapan, Harvey E, 1982. "Social Security Taxation and Intergenerational Risk Sharing," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 23(3), pages 647-58, October. [Downloadable!] (restricted)
    Other versions:
  7. Weil, Philippe, 1987. "Love thy children : Reflections on the Barro debt neutrality theorem," Journal of Monetary Economics, Elsevier, vol. 19(3), pages 377-391, May. [Downloadable!] (restricted)
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