Search results for "Overlapping generations model"
showing 10 items of 12 documents
Integrating retirement and permanent disability in NDC pension schemes
2015
ABSTRACTIn this article, we develop a theoretical basis for integrating retirement and permanent disability using a generic nonfinancial defined contribution framework. The methodology we use relies on a multistate overlapping generations model that includes the so-called survivor dividend. Currently, this feature can only be found in the Swedish defined contribution (DC) scheme. The results achieved in the numerical example we present endorse the fact that the model works well. Special attention is given to the assumptions made about mortality rates for disabled people and disability incidence rates, which largely determine the contribution rate assigned to disability. The model could be o…
Integrating Retirement and Long-Term Care (LTC) Annuities Using a Notional Defined Contribution (NDC) Framework
2014
This paper examines the possibility of embedding public long-term care (LTC) insurance within the retirement pension system, i.e. introducing life care annuities (LCAs) into a notional defined contribution (NDC) framework. To do this we develop a multistate overlapping generations model (MOLG) that includes the so-called survivor dividend and give special attention to the assumptions made about mortality rates for dependent persons and LTC incidence rates, which largely determine the contribution rate assigned to LTC. The proposed model could be of interest to policymakers because it could be implemented without too much difficulty, it would universalize LTC coverage with a "fixed" cost, an…
Notes on Using the Hidden Asset or the Contribution Asset to Compile the Actuarial Balance for Pay-as-You-Go Pension Systems
2010
The aim of this paper is twofold: to determine the connection between the “contribution asset” and the “hidden asset” and to discover whether using either of them to compile the actuarial balance in Swedish-type pay-as-you-go pension systems will provide a reliable solvency indicator. We develop an overlapping generations model and apply it to the defined benefit pay-as-you-go system, although it would be just as valid for NDC systems. On the theoretical side the main conclusion is that, despite their very different natures, in a simplified scenario the contribution asset and the hidden asset could coincide if r - the real rate of interest - is equal to the growth in the wage bill. On the a…
An NDC approach to helping pensioners cope with the cost of long-term care
2018
The aim of this paper is to analyse whether it would be possible to provide retirement and long-term care benefits using the same unfunded notional defined contribution scheme. We extend the multi-state overlapping generations model developed by Pla-Porcel et al. (2016) to include two new features: a long-term care benefit graded according to the annuitant's degree of disability and a minimum pension benefit for both contingencies. This brings the model closer to the reality of social insurance and enhances its political attractiveness. The paper contains a numerical example to show how the model functions and focuses especially on the mortality rates for dependent persons, the inception ra…
Optimal savings and health spending over the life cycle
2010
This paper investigates the relationship between saving and health spending in a two-period overlapping generations economy. Individuals work in the first period of life and live in retirement in old age. Health spending is an activity that increases quality of life and longevity. Empirical evidence shows that both health spending and saving behave as luxury goods but their behaviour differs markedly according to the level of per capita GDP. The share of saving on GDP has a concave shape with respect to per capita GDP, whereas the share of health spending on GDP increases more than proportionally with respect to per capita GDP. The ratio of saving to spending is nonlinear with respect to in…
Cooperation and cultural transmission in a coordination game
2009
Abstract The aim of this paper is to analyze if cooperation can be the product of cultural evolution in a two-stage coordination game, consisting of a production stage followed by a negotiation phase. We present an overlapping generations model with cultural transmission of preferences where the distribution of preferences in the population and the strategies are determined endogenously and simultaneously. There are several groups in the society; some of them play cooperatively and others do not. Socialization takes place inside the group, but there is a positive rate of migration among groups which parents anticipate. Our main result shows that all groups converge to the cooperative equili…
Persistence of Occupational Segregation: The Role of the Intergenerational Transmission of Preferences
2007
This article provides an explanation of the evolution and persistence of the women's segregation in jobs with less on-the-job training opportunities within the framework of an overlapping generations model with intergenerational transmission of preferences. ‘Job-priority’ and ‘family-priority’ preferences are considered. Firms’ policy and the distribution of women's preferences are endogenously and simultaneously determined in the long run. The results show though the gender gap in training will diminish, it will also persist over time. This is because both types of women's preferences coexist at the steady state due to the socialisation effort of parents to preserve their own cultural valu…
LIFE CARE ANNUITIES (LCA) EMBEDDED IN A NOTIONAL DEFINED CONTRIBUTION (NDC) FRAMEWORK
2016
AbstractThis paper examines the possibility of embedding public long-term care (LTC) insurance within the retirement pension system, i.e. introducing life care annuities into a notional defined contribution framework. To do this, we develop a multistate overlapping generations model that includes the so-called survivor dividend and give special attention to the assumptions made about mortality rates for dependent persons and LTC incidence rates, which largely determine the contribution rate assigned to LTC. The proposed model could be of interest to policymakers because it could be implemented without too much difficulty, it would universalize LTC coverage with a “fixed” cost, and it would …
FISCAL POLICY, MACROECONOMIC STABILITY AND FINITE HORIZONS
2003
In this paper we analyse the stabilisation properties of distortionary taxes in a New Keynesian model with overlapping generations of finitely-lived consumers. In this framework, government debt is part of net wealth and this adds a number of interesting channels through which fiscal policy could affect output and inflation. Output volatility, in presence of technology shocks, is not substantially affected by the operation of automatic stabilisers but we find interesting composition effects. While the presence of finitely-lived households strengthens the stabilisation performance of distortionary taxes through the reduction of the volatility of consumption, it does so at the cost of more vo…
A "Swedish" actuarial balance sheet for a notional defined contribution pension scheme with disability and retirement benefits
2016
This paper proposes a “Swedish” type actuarial balance sheet for a notional defined contribution scheme embedding disability insurance within the retirement pension system. The underlying framework supporting the actuarial balance relies on a multistate overlapping generations model that includes the so-called survivor dividend and a minimum pension benefit for both contingencies. The proposed ABS splits the system into two parts: the actuarial part (pure NDC) and the redistributive part, which includes the assets and liabilities originating from non-contributory rights. The paper also contains a numerical example that sheds light on the real applicability of our proposal and confirms that …