Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2022-12-15
Number: 22-088/IV
Author-Name: Damiaan H.J. Chen
Author-Workplace-Name: University of Amsterdam
Author-Name: Roel M.W.J. Beetsma
Author-Workplace-Name: University of Amsterdam
Author-Name: Sweder J.G. van Wijnbergen
Author-Workplace-Name: University of Amsterdam
Title: Intergenerational Sharing ofUnhedgeable Inflation Risk
Abstract: We explore how members of a collective pension scheme can share inflation risks in
the absence of suitable financial market instruments. Using intergenerational risk sharing
arrangements, risks can be allocated better across the various participants of a collective
pension scheme than would be the case in a strictly individual- or cohort-based pension
scheme, as these can only lay off risks via existing financial market instruments. Hence,
intergenerational sharing of these risks enhances welfare. In view of the sizes of their funded
pension sectors, this would be particularly beneficial for the Netherlands and the U.K
Classification-JEL: C61, E21, G11, G23
Keywords: pension funds, intergenerational risk sharing, unhedgeable inflation risk, incomplete markets, welfare loss
File-URL: https://papers.tinbergen.nl/22088.pdf
File-Format: application/pdf
File-Size: 2.100.149  bytes
Handle: RePEc:tin:wpaper:20220088