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Voluntary participation and intergenerational risk sharing in a funded pension system

  • Beetsma, Roel
  • Romp, Ward E
  • Vos, Siert-Jan

We explore the feasibility of a funded pension system with intergenerational risk sharing when participation in the system is voluntary. Typically, the willingness of the young to participate depends on their belief about the future young's willingness to do so. We characterise equilibria with voluntary participation and show that the likelihood of their existence increases with risk aversion and financial market uncertainty. We find that it is likely that mandatory participation is necessary to sustain a funded pension pillar and to let participants benefit from intergenerational risk sharing.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8312.

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Date of creation: Apr 2011
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Handle: RePEc:cpr:ceprdp:8312
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  1. Piero Gottardi & Felix Kubler, 2006. "Social Security and Risk Sharing," CESifo Working Paper Series 1705, CESifo Group Munich.
  2. Roel Beetsma & Ward E. Romp & Siert J. Vos, 2008. "Intergenerational Risk Sharing, Pensions and Endogenous Labor Supply in General Equilibrium," CESifo Working Paper Series 2185, CESifo Group Munich.
  3. Coen Teulings & Casper Vries, 2006. "Generational Accounting, Solidarity and Pension Losses," De Economist, Springer, vol. 154(1), pages 63-83, 03.
  4. Gabrielle Demange, 2009. "On sustainable Pay-As-you-Go contribution rules," Post-Print halshs-00670876, HAL.
  5. Henning Bohn, 1999. "Social Security and Demographic Uncertainty: The Risk Sharing Properties of Alternative Policies," NBER Working Papers 7030, National Bureau of Economic Research, Inc.
  6. Hassler, John & Lindbeck, Assar, 1997. "Intergenerational Risk Sharing, Stability and Optimality of Alternative Pension Systems," Working Paper Series 493, Research Institute of Industrial Economics.
  7. 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 1921, Harvard - Institute of Economic Research.
  8. Matsen, E. & Thogersen, O., 2001. "Designing Social Security - A Portfolio Choice Approach," Papers 21/2001, Norwegian School of Economics and Business Administration-.
  9. Dirk Krueger & Felix Kubler, 2006. "Pareto-Improving Social Security Reform when Financial Markets are Incomplete!?," American Economic Review, American Economic Association, vol. 96(3), pages 737-755, June.
  10. Demange, G. & Laroque, G., 1997. "Social Security with heteregeneous populations subject to demographic shocks," DELTA Working Papers 97-08, DELTA (Ecole normale supérieure).
  11. Gollier, Christian, 2008. "Intergenerational risk-sharing and risk-taking of a pension fund," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 1463-1485, June.
  12. Cui, Jiajia & Jong, Frank De & Ponds, Eduard, 2011. "Intergenerational risk sharing within funded pension schemes," Journal of Pension Economics and Finance, Cambridge University Press, vol. 10(01), pages 1-29, January.
  13. Chan, Yeung Lewis & Viceira, Luis & Campbell, John, 2003. "A Multivariate Model of Strategic Asset Allocation," Scholarly Articles 3163263, Harvard University Department of Economics.
  14. Krueger, Dirk & Perri, Fabrizio, 2010. "Public versus Private Risk Sharing," CEPR Discussion Papers 7625, C.E.P.R. Discussion Papers.
  15. repec:oup:restud:v:63:y:1996:i:4:p:595-609 is not listed on IDEAS
  16. repec:oup:restud:v:55:y:1988:i:4:p:541-54 is not listed on IDEAS
  17. Roel M. W. J. Beetsma & A. Lans Bovenberg, 2009. "Pensions and Intergenerational Risk-sharing in General Equilibrium," Economica, London School of Economics and Political Science, vol. 76(302), pages 364-386, 04.
  18. Bovenberg, A.L. & Koijen, R.S.J. & Nijman, T.E. & Teulings, C.N., 2007. "Saving and investing over the life cycle and the role of collective pension funds," Other publications TiSEM 6eab1341-eda5-4f21-8c06-8, Tilburg University, School of Economics and Management.
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