On optimality in intergenerational risk sharing
AbstractThis paper defines and studies optimality in a dynamic stochastic economy with finitely lived agents, and investigates the optimality properties of an equilibrium with or without sequentially complete markets. Various Pareto optimality concepts are considered, including interim and ex ante optimality. We show that, at an equilibrium with a productive asset (land) and sequentially complete markets, the intervention of a government may be justified, but only to improve risk sharing between generations. If markets are incomplete, constrained interim optimality is investigated in two-period lived OLG economies. We extend the optimality properties of an equilibrium with land and examine conditions under which introducing a pay-as-you-go system would not lead to any Pareto improvement upon an equilibrium.
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Bibliographic InfoPaper provided by HAL in its series Post-Print with number halshs-00581414.
Date of creation: 22 Mar 2001
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Publication status: Published, Economic Theory, 2001, 20, 1, 1-27
Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00581414/en/
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Overlapping generations; Incomplete markets; Optimality;
Other versions of this item:
- D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
- D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
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