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The Rate of Return of Pay-As-You-Go Pension Systems: A More Exact Consumption-Loan Model of Interest

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Author Info
Settergren, Ole
Mikula, Boguslaw D.
Abstract

The article presents a method for calculating the cross-section internal rate of return on contributions to pension systems financed according to the pay-as-you-go principle. The method entails a procedure for valuing the contribution flow of pay-as-you-go financing, and identifies the complete set of factors that determine the cross-section internal rate of return. The procedure makes it possible to apply the algorithm of double-entry bookkeeping in analyzing and presenting the financial position and development of pay-as-you-go pension systems.

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File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/14227/1/pie_dp249.pdf
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Publisher Info
Paper provided by Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University in its series Discussion Paper with number 249.

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Length: 25 p.
Date of creation: Jan 2005
Date of revision:
Handle: RePEc:hit:piedp1:249

Note: 1 September 2003; 13 November 2004; 15 January 2005, This article will appear in the forthcoming World Bank publication: Pension Reform trough NDC:s Issues and Prospects for Non-Financial Defined Contribution Schemes, Robert Holzmann and Edward Palmer (eds.)
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Web page: http://cis.ier.hit-u.ac.jp/
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Related research
Keywords: Social Security; Public Pensions; Internal rate of return; Accounting;

Find related papers by JEL classification:
E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Determination of Interest Rates; Term Structure of Interest Rates
H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
J1 - Labor and Demographic Economics - - Demographic Economics
M41 - Business Administration and Business Economics; Marketing; Accounting - - Accounting - - - Accounting

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  1. Lassila , Jukka & Valkonen, Tarmo, 2008. "Population ageing and fiscal sustainability in Finland: a stochastic analysis," Research Discussion Papers 28/2008, Bank of Finland. [Downloadable!]
  2. Carlos Vidal-Meliá & Inmaculada Domínguez-Fabián & María del Carmen Boado-Penas, . "Notional Defined Contribution Accounts (NDCs): Solvency and Risk; Application to the Case of Spain," Studies on the Spanish Economy 226, FEDEA. [Downloadable!]
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