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Generational Accounting, Solidarity and Pension Losses

Author

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  • Coen N. Teulings

    (SEO, University of Amsterdam)

  • Casper G. de Vries

    (Erasmus University Rotterdam)

Abstract

The stock market collapse led to political tensions between generations due to the fuzzy definition of the property rights over the pension funds’ wealth. The problem is best resolved by the introduction of generational accounts. Modern consumption and portfolio theory shows that the younger generations should have the higher equity exposure due to their human capital. Stock market losses should be distributed smoothly over lifetime consumption by adjusting both current contributions and future entitlements. We present expressions for the substantial welfare losses involved in various practically relevant deviations from the optimal system. This discussion paper resulted in a publication in , 2006. (154(1), 63-83.

Suggested Citation

  • Coen N. Teulings & Casper G. de Vries, 2003. "Generational Accounting, Solidarity and Pension Losses," Tinbergen Institute Discussion Papers 03-094/3, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20030094
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    References listed on IDEAS

    as
    1. Caballero, Ricardo J., 1990. "Consumption puzzles and precautionary savings," Journal of Monetary Economics, Elsevier, vol. 25(1), pages 113-136, January.
    2. Bodie, Zvi & Merton, Robert C. & Samuelson, William F., 1992. "Labor supply flexibility and portfolio choice in a life cycle model," Journal of Economic Dynamics and Control, Elsevier, vol. 16(3-4), pages 427-449.
    3. Finn E. Kydland (ed.), 1995. "Business Cycle Theory," Books, Edward Elgar Publishing, number 565.
    4. Hendricks, Ken & Judd, Ken & Kovenock, Dan, 1980. "A note on the core of the overlapping generations model," Economics Letters, Elsevier, vol. 6(2), pages 95-97.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Saving & investment; Financial institutions; Pension funds; Private pensions; Social security and public pensions;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • G2 - Financial Economics - - Financial Institutions and Services
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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