The Rate of Return of Pay-As-You-Go Pension Systems: A More Exact Consumption-Loan Model of Interest
AbstractThe 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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Bibliographic InfoPaper provided by Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University in its series Discussion Paper with number 249.
Length: 25 p.
Date of creation: Jan 2005
Date of revision:
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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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 - - - Interest Rates: Determination, Term Structure, and Effects
- 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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