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Altruism, Lifetime Uncertainty and Optimal Public Pension Contribution Rate

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  • Yang, Zaigui

Abstract

Assuming that individuals are altruistic, this paper employs an overlapping generations model with lifetime uncertainty to study the partially funded public pension in China. By comparing the market economy equilibrium with the social optimum allocation, we find the optimal firm contribution rate. Our simulation results show that this rate increases when the life expectancy rises, while decreases when the population growth rate falls. It decreases in the joint case of risen life expectancy and fallen population growth rate because it is much more sensitive to the latter than to the former. The result has some policy implications.

Suggested Citation

  • Yang, Zaigui, 2009. "Altruism, Lifetime Uncertainty and Optimal Public Pension Contribution Rate," MPRA Paper 18845, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:18845
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    File URL: https://mpra.ub.uni-muenchen.de/18845/1/MPRA_paper_18845.pdf
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    References listed on IDEAS

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    3. Giandomenico, Rossano, 2006. "Valuing an American Put Option," MPRA Paper 20082, University Library of Munich, Germany.
    4. Geske, Robert & Johnson, Herb E, 1984. " The American Put Option Valued Analytically," Journal of Finance, American Finance Association, vol. 39(5), pages 1511-1524, December.
    5. Vasicek, Oldrich, 1977. "An equilibrium characterization of the term structure," Journal of Financial Economics, Elsevier, vol. 5(2), pages 177-188, November.
    6. Vasicek, Oldrich Alfonso, 1977. "Abstract: An Equilibrium Characterization of the Term Structure," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 12(04), pages 627-627, November.
    7. Giandomenico, Rossano, 2006. "Martingale Model," MPRA Paper 21973, University Library of Munich, Germany.
    8. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
    9. Giandomenico, Rossano, 2006. "Asset Liability Management in Insurance Company," MPRA Paper 16333, University Library of Munich, Germany, revised Jan 2009.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    altruism; lifetime uncertainty; pension contribution rat;

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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