The Risk Premium for Equity: Implications for Clinton's Proposed Diversification of the Social Security Trust Fund
Any meaningful reform of the US Social Security system must deal with the system's current outstanding accumulated unfunded liabilities. The authors model these as a once-off financial liability payable 'tomorrow'. They show that if the equity premium puzzle arises from adverse selection problems which prevent risk-spreading through market transactions, then the government can improve the ex ante welfare of the young today by acquiring equity today to assist in financing its obligations to meet social security payments to the old tomorrow.
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|Date of creation:||1999|
|Date of revision:|
|Contact details of provider:|| Postal: THE AUSTRALIAN NATIONAL UNIVERSITY, DEPARTMENT OF ECONOMICS, RESEARCH SCHOOL of PACIFIC STUDIES, RESEARCH SCHOOL OF SOCIAL SCIENCES, G.P.O. 4, CANBERRA ACT 2601 AUSTRALIA..O. BOX 4 CANBERRA 2601 AUSTRALIA.|
Web page: http://economics.anu.edu.au/economics.htm
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