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The capitalization and portfolio risk of insurance companies

  • Richard W. Kopcke
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    The enormous growth in both Social Security and private pension plans has stimulated much interest in the impact of these retirement programs on individual saving behavior and the level of national saving. The first issue is the extent to which employees covered by pension plans reduce their own direct saving in response to expected retirement benefits; the response of individuals to guaranteed retirement income will determine, to a large extent, their well-being in retirement. For a nation concerned about saving and capital formation, the second issue is the impact of collectivized retirement saving plans on the national saving rate. This impact will depend not only on individual responses to promised pension benefits, but also on the extent to which firms undertake direct saving, and, if they do not, the extent to which shareholders recognize and compensate for unfunded pension liabilities. The effect of pensions on national saving also requires determining the degree to which increased saving induced by favorable tax provisions exceeds the loss of government revenues. ; This paper will lay out the questions that need to be answered in order to determine the impact of private pension plans on saving, highlight those aspects of pensions that may complicate the analysis, summarize the results of empirical research in this area, and finally make recommendations for improvements in the data.

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    Paper provided by Federal Reserve Bank of Boston in its series Working Papers with number 91-3.

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    Date of creation: 1991
    Date of revision:
    Handle: RePEc:fip:fedbwp:91-3
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    1. Douglas W. Diamond, 1984. "Financial Intermediation and Delegated Monitoring," Review of Economic Studies, Oxford University Press, vol. 51(3), pages 393-414.
    2. Richard W. Kopcke & Richard E. Randall, 1991. "Insurance companies as financial intermediaries: risk and return," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 35, pages 19-72.
    3. Takeo Hoshi & Anil K. Kashyap & David Scharfstein, 1989. "Bank monitoring and investment: evidence from the changing structure of Japanese corporate banking relations," Finance and Economics Discussion Series 86, Board of Governors of the Federal Reserve System (U.S.).
    4. Douglas W. Diamond & Philip H. Dybvig, 2000. "Bank runs, deposit insurance, and liquidity," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 14-23.
    5. Kambhu, John, 1990. "Concealment of Risk and Regulation of Bank Risk Taking," Journal of Regulatory Economics, Springer, vol. 2(4), pages 397-414, December.
    6. Galai, Dan & Masulis, Ronald W., 1976. "The option pricing model and the risk factor of stock," Journal of Financial Economics, Elsevier, vol. 3(1-2), pages 53-81.
    7. Takeo Hoshi & Anil Kashyap & David Scharfstein, 1989. "Bank Monitoring and Investment: Evidence from the Changing Structure of Japanese Corporate Banking Relationships," NBER Working Papers 3079, National Bureau of Economic Research, Inc.
    8. Richard E. Randall, 1989. "Can the market evaluate asset quality exposure in banks?," New England Economic Review, Federal Reserve Bank of Boston, issue Jul, pages 3-24.
    9. Leland, Hayne E & Pyle, David H, 1977. "Informational Asymmetries, Financial Structure, and Financial Intermediation," Journal of Finance, American Finance Association, vol. 32(2), pages 371-87, May.
    10. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    11. Fama, Eugene F., 1985. "What's different about banks?," Journal of Monetary Economics, Elsevier, vol. 15(1), pages 29-39, January.
    12. Richard W. Kopcke & Eric S. Rosengren, 1989. "Regulation of debt and equity," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 33, pages 173-220.
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