In an OLG (overlapping generations) economy with only two risky factors of production, human capital and physical capital, a social security system that optimally shares risks among generations was incorporated. By allowing for physical capital acumulation, this paper extends John Compbell's...

This paper uses stochastic simulations on calibrated models to assess the optimal degree of reliance on funded pensions and on a particular type of unfunded (PAYG) pension. Surprisingly little is known about the optimal split between funded and unfunded systems when there are sources of...