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Pensions and Intergenerational Risk-Sharing When Relative Consumption Matters

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  • Ennio Bilancini
  • Massimo D'Antoni

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

Suggested Citation

  • Ennio Bilancini & Massimo D'Antoni, 2008. "Pensions and Intergenerational Risk-Sharing When Relative Consumption Matters," Department of Economics University of Siena 541, Department of Economics, University of Siena.
    • Handle: RePEc:usi:wpaper:541
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    More about this item

    Keywords

    pay-as-you-go pensions; fully funded pensions; relative consumption; inter-generational risk-sharing;
    All these keywords.

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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