Intergenerational Sharing of Unhedgeable Inflation Risk

Damiaan Chen, Roel Beetsma and Sweder van Wijnbergen

Working Papers from DNB

Abstract: We explore how members of a collective pension scheme can share inflation risks in the absence of suitable ï¬ nancial market instruments. Using intergenerational risk sharing arrangements, risks can be allocated better across the various participants of a collective pension scheme than would be the case in a strictly individual- or cohort-based pension scheme, as these can only lay off risks via existing ï¬ nancial market instruments. Hence, intergenerational sharing of these risks enhances welfare. In view of the sizes of their funded pension sectors, this would be particularly beneï¬ cial for the Netherlands and the U.K.

Keywords: pension funds; intergenerational risk sharing; unhedgeable inflation risk; incom- plete markets; welfare loss (search for similar items in EconPapers)
JEL-codes: C61 E21 G11 G23 (search for similar items in EconPapers)
Date: 2022-12
New Economics Papers: this item is included in nep-age and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:dnb:dnbwpp:758

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