Pension systems, Intergenerational Risk Sharing and Inflation

Roel Beetsma and Lans Bovenberg

No 6089, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We investigate intergenerational risk sharing in two-pillar pension systems with a pay-as-you-go pillar and a funded pillar. We consider shocks in productivity, depreciation of capital and inflation. The funded pension pillar can be either defined contribution or defined benefit, with benefits defined in real or nominal terms or indexed to wages. Optimal intergenerational risk sharing can be achieved only in the presence of a defined benefit pension system with appropriate restrictions on investment policy of the funded pillar. In this way, both generations have similar exposures to financial and human capital risks.

Keywords: (funded) pensions; Fiscal policy; Nominal assets; Risk sharing; Overlapping generations (search for similar items in EconPapers)
JEL-codes: E21 H55 J18 (search for similar items in EconPapers)
Date: 2007-02
New Economics Papers: this item is included in nep-cba, nep-mac and nep-pbe
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Citations: View citations in EconPapers (1)

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Working Paper: Pension systems, intergenerational risk sharing and inflation (2006)
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