Intergenerational Risk Sharing in the Spirit of Arrow, Debreu, and Rawls, with Applications to Social Security Design
By Laurence Ball, Gregory Mankiw. Journal of Political Economy, 2001
144 citations recorded by the source corpus.
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.
Subfields: Accounting, Demography, Economics and Econometrics
View Paper: https://www.semanticscholar.org/paper/b390675983f1bb694ebeb254cb29d01f2d640395
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Citations in the corpus
- Intergenerational Risk-Sharing and Risk-Taking of a Pension Fund (2008, background): “This point was made by Diamond (1977), Gordon and Varian (1988), Ball and Mankiw (2001) and Shiller (1999,2003) among others. In a funded system with individual pension accounts, the absence of any intergenerational sharing of individual portfolio risk implies that workers face high uncertainty on t”