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Ageing Populations and Intergenerational Risk-sharing in PAYG Pension Schemes

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  • Kruse, Agneta

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    (Department of Economics, Lund University)

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    Abstract

    The purpose of this paper is to compare pension schemes with respect to their intergenerational redistributive effects caused by economic and demographic changes. It is shown how these effects depend on the specific design of the pension scheme, with special attention devoted to the indexation problem. There is a potential trade-off between financial stability of the pension system and a “desired” distribution between generations. A buffer fund is often seen as the remedy to demographic strain and potential conflict. Therefore, the possibility of accumulating (and de-cumulating) a buffer fund is included. A lifecycle perspective is applied and the risk-sharing is measured by different generations’ rate of return. The analysis is carried out within the framework of an over-lapping generation model in the setting of a stylised economy.

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    File URL: http://project.nek.lu.se/publications/workpap/Papers/WP02_18.pdf
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    Bibliographic Info

    Paper provided by Lund University, Department of Economics in its series Working Papers with number 2002:18.

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    Length: 21 pages
    Date of creation: 02 Jul 2002
    Date of revision:
    Handle: RePEc:hhs:lunewp:2002_018

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    Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund,Sweden
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    Fax: +46 +46 2224613
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    Keywords: Notional defined contribution pension systems; demographic changes; indexing; intergenerational risk-sharing;

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    References

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    1. Feldstein, Martin, 1996. "The Missing Piece in Policy Analysis: Social Security Reform," American Economic Review, American Economic Association, vol. 86(2), pages 1-14, May.
    2. Feldstein, Martin & Liebman, Jeffrey B., 2002. "Social security," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 32, pages 2245-2324 Elsevier.
    3. Alan J. Auerbach & Kevin A. Hassett, 1999. "Uncertainty and the Design of Long-Run Fiscal Policy," NBER Working Papers 7036, National Bureau of Economic Research, Inc.
    4. Richard Disney, 1996. "Can We Afford to Grow Older?," MIT Press Books, The MIT Press, edition 1, volume 1, number 026204157x, December.
    5. Kruse, Agneta, 2000. "Pension Reforms; Effects on Intergenerational Risk-Sharing and Redistribution," Working Papers 2000:10, Lund University, Department of Economics.
    6. Roger H. Gordon & Hal R. Varian, 1985. "Intergenerational Risk Sharing," NBER Working Papers 1730, National Bureau of Economic Research, Inc.
    7. John Y. Campbell & Martin Feldstein, 2001. "Risk Aspects of Investment-Based Social Security Reform," NBER Books, National Bureau of Economic Research, Inc, number camp01-1, October.
    8. Browning, Edgar K, 1975. "Why the Social Insurance Budget Is Too Large in a Democracy," Economic Inquiry, Western Economic Association International, vol. 13(3), pages 373-88, September.
    9. Courtney Coile & Jonathan Gruber, 2000. "Social Security and Retirement," NBER Working Papers 7830, National Bureau of Economic Research, Inc.
    10. Raffelhuschen, Bernd & Risa, Alf Erling, 1995. "Reforming social security in a small open economy," European Journal of Political Economy, Elsevier, vol. 11(3), pages 469-485, September.
    11. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467.
    12. Agneta Kruse & Pier Luigi Porta & Pia Saraceno, 1997. "Pension Systems and Reforms: a Note on Transition Problems," Working Papers 02, University of Milano-Bicocca, Department of Economics, revised Feb 1997.
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    Cited by:
    1. Kruse, Agneta & Nyberg, Kristian, 2004. "Pensions and external effects of ageing; effects on distribution," Working Papers 2004:27, Lund University, Department of Economics.

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