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The desirability of pay-as-you-go pensions when relative consumption matters and returns are stochastic

  • Bilancini, Ennio
  • D’Antoni, Massimo

Under concerns for relative consumption a PAYG system becomes more attractive because it insures pensioners against the risk of being outperformed, but it becomes potentially less effective in hedging the risks associated with financial markets. The net effect is ambiguous.

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Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 117 (2012)
Issue (Month): 2 ()
Pages: 418-422

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Handle: RePEc:eee:ecolet:v:117:y:2012:i:2:p:418-422
Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

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  1. Lindbeck, Assar & Persson, Mats, 2002. "The Gains from Pension Reform," Working Paper Series 580, Research Institute of Industrial Economics.
  2. Erzo F. P. Luttmer, 2005. "Neighbors as Negatives: Relative Earnings and Well-Being," The Quarterly Journal of Economics, MIT Press, vol. 120(3), pages 963-1002, August.
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  14. Ormiston, Michael B & Schlee, Edward E, 2001. "Mean-Variance Preferences and Investor Behaviour," Economic Journal, Royal Economic Society, vol. 111(474), pages 849-61, October.
  15. Lars Tyge Nielsen & Fatma Lajeri, 2000. "Parametric characterizations of risk aversion and prudence," Economic Theory, Springer, vol. 15(2), pages 469-476.
  16. Thomas Eichner & Andreas Wagener, 2003. "Variance Vulnerability, Background Risks, and Mean-Variance Preferences," The Geneva Risk and Insurance Review, Palgrave Macmillan, vol. 28(2), pages 173-184, December.
  17. Chamberlain, Gary, 1983. "A characterization of the distributions that imply mean--Variance utility functions," Journal of Economic Theory, Elsevier, vol. 29(1), pages 185-201, February.
  18. Meyer, Jack, 1987. "Two-moment Decision Models and Expected Utility Maximization," American Economic Review, American Economic Association, vol. 77(3), pages 421-30, June.
  19. Dutta, Jayasri & Kapur, Sandeep & Orszag, J. Michael, 2000. "A portfolio approach to the optimal funding of pensions," Economics Letters, Elsevier, vol. 69(2), pages 201-206, November.
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