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On optimality in intergenerational risk sharing

Listed author(s):
  • Gabrielle Demange

    (DELTA - Département et Laboratoire d'Economie Théorique et Appliquée - ENS Paris - École normale supérieure - Paris - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique)

This paper defines and studies optimality in a dynamic stochastic economy with finitely lived agents, and investigates the optimality properties of an equilibrium with or without sequentially complete markets. Various Pareto optimality concepts are considered, including interim and ex ante optimality. We show that, at an equilibrium with a productive asset (land) and sequentially complete markets, the intervention of a government may be justified, but only to improve risk sharing between generations. If markets are incomplete, constrained interim optimality is investigated in two-period lived OLG economies. We extend the optimality properties of an equilibrium with land and examine conditions under which introducing a pay-as-you-go system would not lead to any Pareto improvement upon an equilibrium.

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Paper provided by HAL in its series Post-Print with number halshs-00581414.

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Date of creation: 22 Mar 2001
Publication status: Published in Economic Theory, Springer Verlag, 2001, 20 (1), pp.1-27. 〈10.1007/s001990100199〉
Handle: RePEc:hal:journl:halshs-00581414
DOI: 10.1007/s001990100199
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