This chapter reviews the literature on intergenerational risk sharing (IRS). We explore to what extent and how a market economy with an appropriate institutional setting can replicate a social planner's solution in models with increasing levels of complexity. In particular, we do this for...

Using an overlapping generations model, two new indicators of public pension system sustainability are proposed: the pension space, which measures the capacity to pay for pension expenditures out of labour taxation, and the pension space exhaustion probability reflecting demographic...

This paper analyses the political constraints of intergenerational risk sharing. The first result is that the political process generally does not lead to ex ante optimal insurance. The second result is that in a second best political setting PAYG still contributes to intergenerational risk...

This paper analyses the political constraints of intergenerational risk sharing. The first result is that the political process generally does not lead to ex ante optimal insurance. The second result is that in a second best political setting PAYG still contributes to intergenerational risk...

In this paper we study the relation between pensions and financial intermediation in an overlapping generations model with Schumpeterian growth and consumption shocks. We show that a financial intermediary may be unable to adequately isolate consumers from the shocks making a funded pension...

Governments have phased out pay-as-you-go pension schemes in favor of funded ones. Instead of dropping the intergenerational transfers of the pay-as-you-go pensions, we propose to invert them. In this way, resources would flow from old to young generations as if it were a system of public...

We study Pareto optimal policy reforms aimed at overhauling retirement financing asan integral part of the tax and transfer system. Our framework for policy analysis is aheterogeneous-agent overlapping-generations model that performs well in matching the aggregateand distributional features of...

Calls to overhaul pension tax relief by scrapping higher rates of relief and setting a so-called "flat rate" "tax relief" are misguided. Such proposals would also face huge practical problems and lead the tax system to become even more complex. Pension tax relief has been criticized as being...

This paper assesses how a permanent shift from financing a public pay-as-you-go pension by direct (labour income) taxation towards financing it by indirect(consumption) taxation affects the economy and welfare. To this end, we use anoverlapping-generations-augmented two-region general...

For more than 25 years, the Social Security Trust Fund has been projected to run out of money in 2033 (give or take a few years), potentially causing benefits to be severely reduced in the absence of corrective legislative action. Today (February 2024), projections are made by the Social...