Social Security with Heterogeneous Populations Subject to Demographic Shocks

Gabrielle Demange and Guy Laroque

The Geneva Risk and Insurance Review, 2001, vol. 26, issue 1, 5-24

Abstract: In a previous paper, we showed how a pay-as-you-go social security scheme, based on voluntary contributions, can be an appropriate institution to reach an optimal sharing of risks among generations in the presence of demographic uncertainties. We study here the functioning of such schemes when there are different population strata, with different demographic shocks and wages. We show that while a collective voluntary pay-as-you-go scheme can provide efficient intergenerational risk sharing, it is likely to be destabilized by pensions funds specialized by agents' types. This is true both when there is a complete set of contingent markets, where the risk pooling capabilities of a collective fund are potentially of less interest, and when markets are incomplete. In this last circumstance, a collective fund may help the living agents to share their intragenerational risks. However, we show that the resulting allocation does not Pareto dominate the outcome of individual funds by agent types, and that there are incentives for agents to separate from any collective organization. The Geneva Papers on Risk and Insurance Theory (2001) 26, 5–24. doi:10.1023/A:1011214423209

Date: 2001
References: Add references at CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.palgrave-journals.com/grir/journal/v26/n1/pdf/grir2001130a.pdf Link to full text PDF (application/pdf)
http://www.palgrave-journals.com/grir/journal/v26/n1/full/grir2001130a.html Link to full text HTML (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Social Security with heterogeneous populations subject to demographic shocks (2001)
Working Paper: Social Security with heteregeneous populations subject to demographic shocks (1997)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:genrir:v:26:y:2001:i:1:p:5-24

Ordering information: This journal article can be ordered from
http://www.springer.com/journal/10713

Access Statistics for this article

The Geneva Risk and Insurance Review is currently edited by Michael Hoy and Nicolas Treich

More articles in The Geneva Risk and Insurance Review from Palgrave Macmillan, International Association for the Study of Insurance Economics (The Geneva Association) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().