Roel Mehlkopf
| Date of PhD defense: | 21 October 2011 |
| Title of thesis: | Risk Sharing with the Unborn |
| ISBN: | 978 90 5668 299 6 |
| Promotores: | Prof.dr. Lans Bovenberg Prof.dr. Frank de Jong |
Abstract:
This dissertation contributes to the existing economic theory on risk sharing, which teaches that financial shocks should be smoothed over as many generations as possible. I show that shifting risk into the future is not optimal anymore once labor-market distortions and the long-run dynamics of labor income are recognized. Current financial shocks should be levied primarily upon currently-living generations. Hence, the risk-bearing capacity of a pension fund is smaller than often thought, and it can be unattractive for a pension fund to have its investment portfolio tilted heavily towards risky assets. Instead, it can be optimal for pension funds to apply a prudent investment strategy in which a substantial fraction of asset holdings are invested in fixed-income products. Such a prudent investment strategy is consistent with solvency regulations that require pension funds to recover from their losses within a relatively short time-period.
Global / English