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The Rate of Return of Pay-As-You-Go Pension Systems: A More Exact Consumption-Loan Model of Interest

Author

Listed:
  • Settergren, Ole
  • Mikula, Boguslaw D.

Abstract

The article presents a method for calculating the cross-section internal rate of return on contributions to pension systems financed according to the pay-as-you-go principle. The method entails a procedure for valuing the contribution flow of pay-as-you-go financing, and identifies the complete set of factors that determine the cross-section internal rate of return. The procedure makes it possible to apply the algorithm of double-entry bookkeeping in analyzing and presenting the financial position and development of pay-as-you-go pension systems.

Suggested Citation

  • Settergren, Ole & Mikula, Boguslaw D., 2005. "The Rate of Return of Pay-As-You-Go Pension Systems: A More Exact Consumption-Loan Model of Interest," Discussion Paper 249, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
    • Handle: RePEc:hit:piedp1:249
    Note: 1 September 2003; 13 November 2004; 15 January 2005, This article will appear in the forthcoming World Bank publication: Pension Reform trough NDC:s Issues and Prospects for Non-Financial Defined Contribution Schemes, Robert Holzmann and Edward Palmer (eds.)
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    File URL: https://hermes-ir.lib.hit-u.ac.jp/hermes/ir/re/14227/pie_dp249.pdf
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    More about this item

    Keywords

    Social Security; Public Pensions; Internal rate of return; Accounting;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J1 - Labor and Demographic Economics - - Demographic Economics
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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