Document Type

Working Paper

Date of This Version

7-1-2019

Keywords

welfare, pay-as-you-go system, international portfolio choice, OLG model

JEL Classification

D52, F21, F41, G11, H55

Abstract

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.

Working Paper Number

1903

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