Risk management of pensions from the perspective of loss aversion
Journal
Journal of Public Economics
ISSN
00472727
Type
journal article
Date Issued
2007
Author(s)
Abstract (De)
This paper studies two interrelated questions. First, is a pay-as-you-go (PAYG) pension com-ponent beneficial from a risk management point of view? Second, does optimal risk man-agement of old-age consumption differ between different income groups? The analysis is based on so-called lexicographic loss aversion preferences. Interest in these preferences stems from the fact that they explain the cross-section of individuals' savings and asset allo-cation choices better than alternative models. I find that all income groups benefit from the presence of a substantial PAYG component. Only for the two highest income quintiles old-age provision should heavily rely on equity investments.
Language
English
HSG Classification
contribution to scientific community
HSG Profile Area
SEPS - Economic Policy
Refereed
Yes
Volume
91
Number
3-4
Start page
641
End page
667
Official URL
Subject(s)
Contact Email Address
johannes.binswanger@unisg.ch
Eprints ID
255460