Template-Type: ReDIF-Paper 1.0 Series: Tinbergen Institute Discussion Papers Creation-Date: 2011-03-17 Number: 11-056/2/DSF19 Author-Name: Roel Beetsma Author-Email: r.m.w.j.beetsma@uva.nl Author-Workplace-Name: University of Amsterdam, Netspar, CEPR, and CESifo Author-Name: Ward Romp Author-Email: w.e.romp@uva.nl Author-Workplace-Name: University of Amsterdam, and Mn Services Author-Name: Siert J. Vos Author-Email: s.j.vos@uva.nl Author-Workplace-Name: University of Amsterdam, and Netspar Title: Voluntary Participation and Intergenerational Risk Sharing in a Funded Pension System Abstract: We explore the feasibility of a funded pension system with intergenerational risk sharing when participation in the system is voluntary. Typically, the willingness of the young to participate depends on their belief about the future young's willingness to do so. We characterise equilibria with voluntary participation and show that the likelihood of their existence increases with risk aversion and financial market uncertainty. We find that it is likely that mandatory participation is necessary to sustain a funded pension pillar and to let participants benefit from intergenerational risk sharing.

Published in the 'European Economic Review'. Classification-JEL: C61, H55, J32 Keywords: participation constraints, funded pensions, intergenerational risk sharing File-Url: https://papers.tinbergen.nl/11056.pdf File-Format: application/pdf File-Size: 396004 bytes Handle: RePEc:tin:wpaper:20110056