Resource title

Generational accounting, solidarity and pension losses

Resource image

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Resource description

The creeping stock market collapse eroded the wealth of funded pension systems. This led to political tensions between generations due to the fuzzy definition of property rights on the pension funds wealth. We argue that this problem can best be resolved by the introduction of generational accounts. Using modern portfolio and consumption planning theory we show that the younger generations should have the higher equity exposure due to their human capital. Capital losses should be distributed smoothly over lifetime consumption. When stock markets are depressed equity should be bought, savings and consumption should be scaled down equiproportionally, and retirement should be postponed. Portfolio investment restrictions are quite costly.

Resource author

Coen N. Teulings, Casper G. de Vries

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/20197

Resource license

Adapt according to the presented license agreement and reference the original author.