Intergenerational Risk Sharing
Roel Beetsma and
Chapter Chapter 6 in Handbook of the Economics of Population Aging, 2016, pp 311-380 from Elsevier
This chapter reviews the literature on intergenerational risk sharing (IRS). We explore to what extent and how a market economy with an appropriate institutional setting can replicate a social planner's solution in models with increasing levels of complexity. In particular, we do this for different combinations of pay-as-you-go and funded pension arrangements, after which we turn to the role of public debt policy in promoting IRS. Existing studies show the potential welfare improvements of IRS. We highlight a number of real-world obstacles that limit the gains from IRS, including transitional issues, labor market distortions, participation constraints, and political factors. This is followed by a review of policy options to promote IRS and to deal with these obstacles. Finally, we identify a number of gaps in the literature on IRS.
Keywords: Intergenerational risk sharing; Pay-as-you-go pensions; Funded pensions; Public debt; Social planner; Welfare; Ageing; Participation constraints; E20; E62; H31; H55; H63; J11; J26 (search for similar items in EconPapers)
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