Generational Accounting, Solidarity and Pension Losses

Casper G. de Vries () and C. N. Teulings ()

No 4209, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The creeping stock market collapse eroded the wealth of funded pension systems. This led to political tensions between generations due to the fuzzy definition of property rights on the pension funds wealth. We argue that this problem can best be resolved by the introduction of generational accounts. Using modern portfolio and consumption planning theory we show that the younger generations should have the higher equity exposure due to their human capital. Capital losses should be distributed smoothly over lifetime consumption. When stock markets are depressed equity should be bought, savings and consumption should be scaled down equiproportionally, and retirement should be postponed. Portfolio investment restrictions are quite costly.

Keywords: Financial institutions; pension funds; private pensions; Saving & investment; Social security and public pensions (search for similar items in EconPapers)
JEL-codes: E20 G20 G23 H55 J32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pbe
Date: 2004-01
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Related works:
Working Paper: Generational Accounting, Solidarity and Pension Losses (2003)
Journal Article: Generational Accounting, Solidarity and Pension Losses (2006)
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