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Innovative investments, natural resources, and intergenerational fairness : are pension funds good for sustainable development?

We analyse long-term consumption paths in a dynamic two-sector economy with overlapping generations. Each young generation saves for the retirement age, both with private savings and pension funds. The productivity of each sector can be raised by sector-specific research while the essential use of a non-renewable natural resource poses a threat to consumption possibilities in the long run. Bonds, the two types innovations, and resource stocks are the different investment opportunities. We show that pension funds have a positive impact on long-term development, provided that individuals have a preference for own investments. In this case, sustainability is more likely to be achieved due to pension fund savings.

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Paper provided by CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich in its series CER-ETH Economics working paper series with number 05/36.

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Length: 30 pages
Date of creation: Feb 2005
Date of revision:
Handle: RePEc:eth:wpswif:05-36
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