Intergenerational Risk Sharing in the Spirit of Arrow, Debreu, and Rawls, with Applications to Social Security Design

Laurence Ball and N. Gregory Mankiw

No 1921, Harvard Institute of Economic Research Working Papers from Harvard - Institute of Economic Research

Abstract: This paper examines the optimal allocation of risk in an overlapping-generations economy. It compares the allocation of risk the economy reaches naturally to the allocation that would be reached if generations behind a Rawlsian "veil of ignorance" could share risk with one another through complete Arrow-Debreu contingent-claims markets. The paper then examines how the government might implement optimal intergenerational risk sharing with a social security system. One conclusion is that the system must either hold equity claims to capital or negatively index benefits to equity returns.

Date: 2001
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Related works:
Journal Article: Intergenerational Risk Sharing in the Spirit of Arrow, Debreu, and Rawls, with Applications to Social Security Design (2007)
Working Paper: Intergenerational Risk Sharing in the Spirit of Arrow, Debreu, and Rawls, with Applications to Social Security Design (2007)
Working Paper: Intergenerational Risk Sharing in the Spirit of Arrow Debreu and Rawls with Applications to Social Security Design (2001)
Working Paper: Intergenerational Risk Sharing in the Spirit of Arrow, Debreu, and Rawls, with Applications to Social Security Design (2001)
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