On optimality in intergenerational risk sharing

Gabrielle Demange

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Abstract: This paper defines and studies optimality in a dynamic stochastic economy with finitely lived agents, and investigates the optimality properties of an equilibrium with or without sequentially complete markets. Various Pareto optimality concepts are considered, including interim and ex ante optimality. We show that, at an equilibrium with a productive asset (land) and sequentially complete markets, the intervention of a government may be justified, but only to improve risk sharing between generations. If markets are incomplete, constrained interim optimality is investigated in two-period lived OLG economies. We extend the optimality properties of an equilibrium with land and examine conditions under which introducing a pay-as-you-go system would not lead to any Pareto improvement upon an equilibrium.

Keywords: Overlapping generations; Incomplete markets; Optimality (search for similar items in EconPapers)
Date: 2001-03-22
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00581414
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Published in Economic Theory, 2001, 20 (1), pp.1-27. ⟨10.1007/s001990100199⟩

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Related works:
Journal Article: On optimality in intergenerational risk sharing (2002)
Working Paper: On Optimality of Intergenerational Risk Sharing (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00581414

DOI: 10.1007/s001990100199

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