Pensions and Intergenerational Risk-Sharing When Relative Consumption Matters

Ennio Bilancini and Massimo D'Antoni

Department of Economics University of Siena from Department of Economics, University of Siena

Abstract: Concern for relative consumption introduces an additional source of risk for future pensioners. We study its implications, in terms of optimal risk diversification, for the choice of the mix between a pay-as-you-go and a funded pension systems. We identify a necessary and sufficient condition for the optimal share of pay-as-you-go to be larger when relative consumption matters. We argue that when model parameters assume reasonable values such condition is satisfied

Keywords: pay-as-you-go pensions; fully funded pensions; relative consumption; inter-generational risk-sharing (search for similar items in EconPapers)
JEL-codes: H55 (search for similar items in EconPapers)
Date: 2008-08
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Persistent link: https://EconPapers.repec.org/RePEc:usi:wpaper:541

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