Optimal strategies for pay-as-you-go pension finance: A sustainability framework

Humberto Godínez-Olivares, María del Carmen Boado-Penas and Steven Haberman

Insurance: Mathematics and Economics, 2016, vol. 69, issue C, 117-126

Abstract: The aim of this paper is to design an automatic balancing mechanism to restore the sustainability of a pay-as-you-go (PAYG) pension system based on changes in its main variables, such as the contribution rate, normal retirement age and indexation of pensions. Using nonlinear optimisation, this mechanism, identifies and applies an optimal path of these variables to a PAYG system in the long run and absorbs fluctuations in longevity, fertility rates, salary growth or any other events in a pension system.

Keywords: Optimisation; Pay-as-you-go; Public pensions; Risk; Sustainability (search for similar items in EconPapers)
JEL-codes: E62 H55 J11 J26 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:69:y:2016:i:c:p:117-126

DOI: 10.1016/j.insmatheco.2016.05.001

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