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On optimality in intergenerational risk sharing

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  • Gabrielle Demange

    (DELTA - Département et Laboratoire d'Economie Théorique et Appliquée - Ecole Normale Supérieure de Paris - ENS Paris - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR8545)

Abstract

This 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 Info

Paper provided by HAL in its series Post-Print with number halshs-00581414.

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Date of creation: 22 Mar 2001
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Publication status: Published, Economic Theory, 2001, 20, 1, 1-27
Handle: RePEc:hal:journl:halshs-00581414

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Keywords: Overlapping generations; Incomplete markets; Optimality;

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