IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/38668.html
   My bibliography  Save this paper

Savings for retirement under liquidity constraints: a note

Author

Listed:
  • Corsini, Lorenzo
  • Spataro, Luca

Abstract

Pension systems often entail some compulsory saving over which individuals have some degree of choice in terms of the pension plan in which to invest. Our contribution analyses whether the choice between alternative plans is affected by the presence of liquidity constraints during working life. We show that liquidity constraints obviously affect the amount saved and consumed during working life but they do not affect the decision on which pension plan to choose. In fact we prove that the analytical conditions that determine the choice between different plans are the same in the constrained and unconstrained case.

Suggested Citation

  • Corsini, Lorenzo & Spataro, Luca, 2012. "Savings for retirement under liquidity constraints: a note," MPRA Paper 38668, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:38668
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/38668/1/MPRA_paper_38668.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Matsen, Egil & Thogersen, Oystein, 2004. "Designing social security - a portfolio choice approach," European Economic Review, Elsevier, vol. 48(4), pages 883-904, August.
    2. Corsini, Lorenzo & Spataro, Luca, 2011. "Optimal decisions on pension plans in the presence of financial literacy costs and income inequalities," MPRA Paper 30946, University Library of Munich, Germany.
    3. Makarov, Dmitry & Schornick, Astrid V., 2010. "A note on wealth effect under CARA utility," Finance Research Letters, Elsevier, vol. 7(3), pages 170-177, September.
    4. De Menil, Georges & Murtin, Fabrice & Sheshinski, Eytan, 2006. "Planning for the optimal mix of paygo tax and funded savings," Journal of Pension Economics and Finance, Cambridge University Press, vol. 5(1), pages 1-25, March.
    5. Andreas Wagener, 2003. "Pensions as a portfolio problem: fixed contribution rates vs. fixed replacement rates reconsidered," Journal of Population Economics, Springer;European Society for Population Economics, vol. 16(1), pages 111-134, February.
    6. Dutta, Jayasri & Kapur, Sandeep & Orszag, J. Michael, 2000. "A portfolio approach to the optimal funding of pensions," Economics Letters, Elsevier, vol. 69(2), pages 201-206, November.
    7. Lorenzo Corsini & Pier Mario Pacini & Luca Spataro, 2012. "Workers' Choice on Pension Schemes," Public Finance Review, , vol. 40(2), pages 207-239, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Lorenzo Corsini & Luca Spataro, 2015. "Optimal Decisions on Pension Plans in the Presence of Information Costs and Financial Literacy," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 17(3), pages 383-414, June.
    2. Carpio, Ronaldo & Guo, Meixin & Liu, Yuan & Pyun, Ju Hyun, 2021. "Wealth heterogeneity, information acquisition and equity home bias: Evidence from U.S. household surveys of consumer finance," Journal of Banking & Finance, Elsevier, vol. 126(C).
    3. Dolores Moreno-Herrero & Manuel Salas-Velasco & José Sánchez-Campillo, 2017. "Individual Pension Plans in Spain: How Expected Change in Future Income and Liquidity Constraints Shape the Behavior of Households," Journal of Family and Economic Issues, Springer, vol. 38(4), pages 596-613, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lorenzo Corsini & Luca Spataro, 2015. "Optimal Decisions on Pension Plans in the Presence of Information Costs and Financial Literacy," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 17(3), pages 383-414, June.
    2. De Menil, Georges & Murtin, Fabrice & Sheshinski, Eytan & Yokossi, Tite, 2016. "A rational, economic model of paygo tax rates," European Economic Review, Elsevier, vol. 89(C), pages 55-72.
    3. Markus Knell, 2010. "The Optimal Mix Between Funded and Unfunded Pension Systems When People Care About Relative Consumption," Economica, London School of Economics and Political Science, vol. 77(308), pages 710-733, October.
    4. repec:onb:oenbwp:y::i:146:b:1 is not listed on IDEAS
    5. Meijdam, A.C. & Ponds, E.H.M., 2013. "On the Optimal Degree Of Funding Of Public Sector Pension Plans," Other publications TiSEM 1c5b7af1-e1ee-4d01-a341-f, Tilburg University, School of Economics and Management.
    6. Øystein Thøgersen, 2006. "Intergenerational Risk Sharing by Means of Pay-as-you-go Programs – an Investigation of Alternative Mechanisms," CESifo Working Paper Series 1759, CESifo.
    7. Alonso-García, J. & Devolder, P., 2016. "Optimal mix between pay-as-you-go and funding for DC pension schemes in an overlapping generations model," Insurance: Mathematics and Economics, Elsevier, vol. 70(C), pages 224-236.
    8. Romaniuk, Katarzyna, 2018. "A simple rule to determine the usefulness of the paygo system on diversification grounds," The Quarterly Review of Economics and Finance, Elsevier, vol. 67(C), pages 282-284.
    9. Bilancini, Ennio & D’Antoni, Massimo, 2012. "The desirability of pay-as-you-go pensions when relative consumption matters and returns are stochastic," Economics Letters, Elsevier, vol. 117(2), pages 418-422.
    10. Westerhout, Ed & Meijdam, Lex & Ponds, Eduard & Bonenkamp, Jan, 2022. "Should we revive PAYG? On the optimal pension system in view of current economic trends," European Economic Review, Elsevier, vol. 148(C).
    11. Devolder, Pierre & Melis, Roberta, 2015. "Optimal Mix Between Pay As You Go And Funding For Pension Liabilities In A Stochastic Framework," ASTIN Bulletin, Cambridge University Press, vol. 45(3), pages 551-575, September.
    12. M. Carmen Boado-Penas & Julia Eisenberg & Ralf Korn, 2019. "Transforming public pensions: A mixed scheme with a credit granted by the state," Papers 1912.12329, arXiv.org.
    13. Szüle, Borbála, 2013. "Demográfiai hatások és implicit hozamok kapcsolata a nyugdíjrendszerekben [The relationship of demographic effects and implicit returns in pension systems]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(6), pages 703-721.
    14. Muysken, J. & Sleijpen, O.C.H.M., 2011. "Lessons from the financial crisis: funded pension funds should invest conservatively," Research Memorandum 020, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    15. D'Amato, Marcello & Galasso, Vincenzo, 2010. "Political intergenerational risk sharing," Journal of Public Economics, Elsevier, vol. 94(9-10), pages 628-637, October.
    16. Szüle, Borbála, 2011. "Portfólióelméleti modell szerinti optimális nyugdíjrendszer [The optimal pension system according to a portfolio theory model]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(9), pages 792-805.
    17. Boado-Penas, M. Carmen & Eisenberg, Julia & Korn, Ralf, 2021. "Transforming public pensions: A mixed scheme with a credit granted by the state," Insurance: Mathematics and Economics, Elsevier, vol. 96(C), pages 140-152.
    18. Wagener, Andreas, 2004. "On intergenerational risk sharing within social security schemes," European Journal of Political Economy, Elsevier, vol. 20(1), pages 181-206, March.
    19. Debora Kusmerski Bilard, 2008. "Optimal Sharing of Labor Productivity Risks and Mix of Pay-As-You-Go and Savings," Tinbergen Institute Discussion Papers 08-066/1, Tinbergen Institute, revised 09 Aug 2012.
    20. Hans Fehr & Christian Habermann, 2008. "Risk Sharing and Efficiency Implications of Progressive Pension Arrangements," Scandinavian Journal of Economics, Wiley Blackwell, vol. 110(2), pages 419-443, June.
    21. Börsch-Supan, A. & Härtl, K. & Leite, D.N., 2016. "Social Security and Public Insurance," Handbook of the Economics of Population Aging, in: Piggott, John & Woodland, Alan (ed.), Handbook of the Economics of Population Aging, edition 1, volume 1, chapter 0, pages 781-863, Elsevier.

    More about this item

    Keywords

    Choice on pension plans; optimal portfolio composition; incomplete markets; liquidity constraints;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:38668. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.