The Effects of Financing Rules in Pay-As-You-Go Pension Systems on the Life and the Business Cycle

Christian Scharrer

No 340, Discussion Paper Series from Universitaet Augsburg, Institute for Economics

Abstract: I study the impacts of financing rules for financial surpluses in pay-as-you-go pension systems on the business cycle and the life cycle in a dynamic stochastic large-scale overlapping generations model, where households take the inter-temporal links between contributions and pension benefits explicitly into account. The results point out that sluggish adjustments of contribution rates that are implemented by adjusting a financial buffer stock both stabilize an economy and decrease the volatility of life-time utilities of retirees and workers close to retirement. Such a policy allows these households a better hedge against macroeconomic shocks over the business cycle. Moreover, I show that the impacts of higher fluctuations of aggregate variables on the volatility of individual lifetime utilities can rather be negligible.

Keywords: overlapping generations; pay-as-you-go pension systems; financing rules; business cycle; life cycle; rbc-model (search for similar items in EconPapers)
JEL-codes: E21 E30 H55 (search for similar items in EconPapers)
Date: 2020-07
New Economics Papers: this item is included in nep-age, nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: The effects of financing rules in pay-as-you-go pension systems on the life and the business cycle (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:aug:augsbe:340

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