A well established believe in the pension industry is that collective pension funds should take more stock market risk (compared to individual retirement accounts) since risk may be shared with future generations. We extend the OLG model of Gollier (2008) by adding labor income risk in the...

This paper evaluates the welfare effects from labor-supply distortions in the context of a pre-funded social security scheme. The central feature of the pension fund model is that equity risk manifests itself in the form of implicit taxes and subsidies on the labor earnings of participants. The...

This article reviews the literature on the optimal design and regulation of funded pension schemes. We first characterize optimal saving and investment over an individual's life cycle. Within a stylized modeling framework, we explore optimal individual saving and investing behavior....

Pension funds face macro-longevity risk or uncertainty about future mortality rates.We analyze macro-longevity risk sharing between cohorts in a pension scheme as a riskmanagement tool. We show that the optimal risk-sharing rule and the welfare gains fromrisk sharing largely depend on the...

A well-established belief in the pension industry is that collective pension funds with mandatory participation can take more stock market risk compared to pension schemes based on individual retirement accounts, because current risks can be shared with future generations. We setup a continuous...

This paper evaluates approximation methods to make manageable the numerical solution of overlapping generation models with aggregate risk. The paper starts with a model in which households maximize expected utility over their life cycle. Instantaneous utility is characterized by constant...