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Some Propositions on Intergenerational Risk Sharing, Social Security and Self-Insurance

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  • Aoki, Takaaki

Abstract

This article describes, within a myopic intergenerational bargaining framework incorporating two discrete periods and binary states of risks, some new aspects regarding the mixture of intergenerational risk sharing and social security. Here, state-dependent utility under mortality risk proves to generate parents’ peculiar indifference curve regarding insurance contract, and self-insurance is shown to play a crucial role on the decision regarding social security holding and intergenerational transfer contract. This peculiar aspect, given for the first time in this article, also derives some novel features of insurance theory under lifetime uncertainty, where the current position in social security contract could adversely affect parents’ decision regarding intergenerational risk sharing with children. In addition, other basic results regarding the sensitivity to default risk and taxation in social security are summarized.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 11684.

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Date of creation: Aug 2006
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Handle: RePEc:pra:mprapa:11684

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Keywords: Intergenerational Risk Sharing; Social Security; Self Insurance;

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References

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  1. Laurence Ball & N. Gregory Mankiw, 2001. "Intergenerational Risk Sharing in the Spirit of Arrow, Debreu, and Rawls, with Applications to Social Security Design," Harvard Institute of Economic Research Working Papers, Harvard - Institute of Economic Research 1921, Harvard - Institute of Economic Research.
  2. Bernheim, B Douglas & Shleifer, Andrei & Summers, Lawrence H, 1986. "The Strategic Bequest Motive," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 4(3), pages S151-82, July.
  3. Enders, Walter & Lapan, Harvey E., 1982. "Social Security Taxation and Inter-Generational Risk Sharing," Staff General Research Papers 10822, Iowa State University, Department of Economics.
  4. Andrew B. Abel, . "Operative Gift and Bequest Motives," Rodney L. White Center for Financial Research Working Papers, Wharton School Rodney L. White Center for Financial Research 9-87, Wharton School Rodney L. White Center for Financial Research.
  5. Abel, Andrew B, 1985. "Precautionary Saving and Accidental Bequests," American Economic Review, American Economic Association, American Economic Association, vol. 75(4), pages 777-91, September.
  6. Roger H. Gordon & Hal R. Varian, 1985. "Intergenerational Risk Sharing," NBER Working Papers 1730, National Bureau of Economic Research, Inc.
  7. Ehrlich, Isaac & Becker, Gary S, 1972. "Market Insurance, Self-Insurance, and Self-Protection," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 80(4), pages 623-48, July-Aug..
  8. Hayashi, Fumio & Altonji, Joseph & Kotlikoff, Laurence, 1996. "Risk-Sharing between and within Families," Econometrica, Econometric Society, Econometric Society, vol. 64(2), pages 261-94, March.
  9. Drazen, Allan, 1978. "Government Debt, Human Capital, and Bequests in a Life-Cycle Model," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 86(3), pages 505-16, June.
  10. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262150476, December.
  11. B. Douglas Bernheim, 1992. "How Strong are Bequest Motives? Evidence Based on Estimates of the Demand for Life Insurance and Annuities," NBER Working Papers 2942, National Bureau of Economic Research, Inc.
  12. Hurd, Michael D, 1989. "Mortality Risk and Bequests," Econometrica, Econometric Society, Econometric Society, vol. 57(4), pages 779-813, July.
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Cited by:
  1. Aoki, Takaaki, 2008. "On the Implications of Two-way Altruism in Human-Capital-Based OLG Model," MPRA Paper 12492, University Library of Munich, Germany.

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