Pension Economic

Pension Economics......Page 4
Contents......Page 10
Preface......Page 14
1.1 What is Pension Economics?......Page 18
1.2 Types of Pension Scheme......Page 20
Questions......Page 27
References......Page 28
2.1 The Lifecycle Model......Page 30
2.2.1 Unfunded State Pension......Page 36
2.2.2 Private Funded Pension......Page 37
2.3.1 No Pension......Page 40
2.3.2 Private Funded Pension......Page 41
2.3.3 Unfunded State Pension......Page 42
2.3.4 Unfunded State Pension with Private Funded Pension......Page 43
2.4 Empirical Studies Testing the Validity of the Lifecycle Model......Page 45
2.5 The Feldstein Lifecycle Model with Induced Retirement......Page 47
2.5.1 The Consumption Decision......Page 49
2.5.2 Retirement Behaviour......Page 54
2.5.3 Discussion......Page 55
2.6 Conclusions......Page 56
Questions......Page 57
References......Page 58
3.1 The Provision of Pensions by Corporations......Page 64
3.2.1 Pensions as Altruism......Page 65
3.2.2 Pensions as Deferred Pay......Page 66
3.2.3 Pensions as Contingent Claims......Page 77
3.3 The Nature of Corporate Pension Liabilities......Page 78
3.4.1 Quitting......Page 81
3.4.2 Mandatory Retirement......Page 83
3.5 Tax and Pension Fund Policy......Page 85
3.6 Agency Costs in Pension Schemes and Pension Funds......Page 88
3.6.1 Insider-Trustees......Page 89
3.6.2 Underfunding the Pension Scheme......Page 92
3.6.3 Performance-Related Fund Management Fees......Page 97
3.6.4 Shareholder Activism and Corporate Governance......Page 98
3.6.5 Moral Hazard, Adverse Selection and Disability Pensions......Page 99
3.7 Conclusions......Page 100
Questions......Page 101
References......Page 102
4 Pensions in the Diamond–Samuelson Overlapping Generations Model with Certain Lifetimes......Page 106
4.1 The Two-Period Diamond–Samuelson OLG Model......Page 107
4.1.1 Individuals......Page 108
4.1.2 Firms......Page 115
4.1.3 Market Equilibrium......Page 117
4.1.4 Dynamics, Stability and the Steady State......Page 118
4.1.5 Optimality and Efficiency......Page 120
4.2 Pensions in the Diamond–Samuelson OLG Model with Exogenous Labour Supply and Retirement......Page 122
4.2.1 State Pension Scheme......Page 123
4.2.2 The Equivalence of PAYG and Government Debt......Page 134
4.2.3 Transitional and Welfare Effects......Page 137
4.2.4 From PAYG to a Funded Pension Scheme......Page 138
4.3.1 Individuals......Page 139
4.3.2 Market Equilibrium......Page 142
4.3.3 The Steady State......Page 143
4.3.4 Welfare Effects......Page 146
4.4 Conclusions......Page 149
Questions......Page 150
References......Page 152
5.1.1 Yaari’s Contribution......Page 154
5.1.3 Individuals......Page 159
5.1.4 Aggregate Consumption......Page 161
5.1.5 Firms......Page 164
5.1.6 Government and Market Equilibrium......Page 165
5.1.7 The Phase Diagram......Page 166
5.2 PAYG Pensions in the Blanchard–Yaari OLG Model with Endogenous Labour Supply and Mandatory Retirement......Page 169
5.3 Conclusions......Page 171
Questions......Page 172
References......Page 173
6.1 The Macroeconomic Effects of Ageing: Declining Population Growth and the Increasing Dependency Ratio......Page 174
6.2 Pensions in the Diamond–Samuelson OLG Model with a Variable Population Growth Rate......Page 178
6.3 Generational Accounting......Page 181
6.4 Conclusions......Page 184
References......Page 185
7 Risk Sharing and Redistribution in Pension Schemes......Page 188
7.1 Risks in Private Pension Schemes......Page 191
7.2 Risk Sharing in Personal Pension Schemes......Page 192
7.3 Risk Sharing in Occupational Pension Schemes......Page 194
7.3.1 Complete Markets......Page 195
7.3.2 Incomplete Markets......Page 197
7.4 Redistribution in Private Pension Schemes......Page 205
7.5 Private Sector Market Failure and the Compensating Role of State Pension Schemes......Page 208
7.6 Risks in State Pension Schemes......Page 209
7.7 Risk Sharing in State Pension Schemes......Page 213
7.7.1 The Family......Page 214
7.7.2 Social Security Pension System......Page 215
7.9.1 Viability......Page 223
7.9.2 The Transition Deficit......Page 227
7.10 Conclusions......Page 230
Questions......Page 232
References......Page 234
8 Behavioural Pension Economics......Page 238
8.1.1 The Savings Decision......Page 239
8.1.2 The Investment Decision......Page 244
8.2.1 Longevity Risk......Page 255
8.2.2 Inflation and Capital Market Risk......Page 256
8.3 Conclusions......Page 257
Questions......Page 259
References......Page 260
Index......Page 266