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Full-Text Articles in Business
International Welfare Spillovers Of National Pension Schemes, James Staveley-O'Carroll, Olena Staveley-O'Carroll
International Welfare Spillovers Of National Pension Schemes, James Staveley-O'Carroll, Olena Staveley-O'Carroll
Economics Department Working Papers
We employ a two-country overlapping-generations model to explore the international dimension of household portfolio choices induced by the asymmetric provision of government-run pensions. We study the resulting patterns of risk-sharing and the corresponding welfare effects on both home and foreign agents. Introducing the defined benefits pay-as-you-go system at home increases the welfare of all other agents at the expense of the home workers and improves the degree of intergenerational risk sharing abroad. Conversely, a defined contributions system leads to welfare losses of both home cohorts accompanied by gains abroad, but does increase the extent of intergenerational risk sharing at home.
International Risk Sharing In Overlapping Generations Models, James Staveley-O'Carroll, Olena M. Staveley-O'Carroll
International Risk Sharing In Overlapping Generations Models, James Staveley-O'Carroll, Olena M. Staveley-O'Carroll
Economics Department Working Papers
We present a solution to the Backus-Smith puzzle that, instead of relying on extreme parameter values or complex modeling assumptions, simply switches the framework from infinitely lived agents to overlapping generations. Young agents face non-diversifiable wage risk that leads to a low degree of risk sharing within each country. Subsequently, international price movements are not sufficient to achieve the high consumption-real exchange rate correlation produced in standard infinitely lived agent DSGE models.