The Risk Premium for Equity: Implications for Clinton's Proposed Diversification of the Social Security Trust Fund
AbstractAny meaningful reform of the US Social Security system must deal with the system's current outstanding accumulated unfunded liabilities. The authors model these as a once-off financial liability payable 'tomorrow'. They show that if the equity premium puzzle arises from adverse selection problems which prevent risk-spreading through market transactions, then the government can improve the ex ante welfare of the young today by acquiring equity today to assist in financing its obligations to meet social security payments to the old tomorrow.
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Bibliographic InfoPaper provided by Australian National University - Department of Economics in its series Papers with number 368.
Length: 12 pages
Date of creation: 1999
Date of revision:
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Postal: THE AUSTRALIAN NATIONAL UNIVERSITY, DEPARTMENT OF ECONOMICS, RESEARCH SCHOOL of PACIFIC STUDIES, RESEARCH SCHOOL OF SOCIAL SCIENCES, G.P.O. 4, CANBERRA ACT 2601 AUSTRALIA..O. BOX 4 CANBERRA 2601 AUSTRALIA.
Web page: http://economics.anu.edu.au/economics.htm
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SOCIAL SECURITY ; EQUITY ; FISCAL POLICY;
Other versions of this item:
- Grant, S. & Quiggin, J., 1999. "The Risk Premium for Equity: Implications for Clinton's Proposed Diversification of the Social Security Trust Fund," ANU Working Papers in Economics and Econometrics 1999-368, Australian National University, College of Business and Economics, School of Economics.
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
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- Grant, Simon & Quiggin, John, 2003. "The Risk Premium for Equity: Implicatiosn for Resource Allocation, Welfare adn Policy," Working Papers 2003-14, Rice University, Department of Economics.
- Grant, Simon & Quiggin, John, 2000. "The interaction between the equity premium and the risk-free rate," Economics Letters, Elsevier, vol. 69(1), pages 71-79, October.
- Grant, S. & Quiggin, J., 2001. "The Risk Premium for Equity: Explanations and Implications," Discussion Paper 2001-89, Tilburg University, Center for Economic Research.
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