A simple rule to determine the usefulness of the paygo system on diversification grounds

Katarzyna Romaniuk

The Quarterly Review of Economics and Finance, 2018, vol. 67, issue C, 282-284

Abstract: The paper proves that the pay-as-you-go (paygo) pension system existence is justified on diversification grounds when the correlation between stocks and wages is strictly lower than the ratio of the wage risk price to the stock risk price.

Keywords: Social security; Unfunded and funded pension systems; Optimal portfolio; Diversification; Correlation between stocks and wages; Risk price (search for similar items in EconPapers)
JEL-codes: C61 G11 G23 H55 (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:67:y:2018:i:c:p:282-284

DOI: 10.1016/j.qref.2017.07.012

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