1.Consider again the OLG model . Explain briefly and clearly (without algebra) why moving from a PAYG to a fully funded
Posted: Sat Feb 19, 2022 3:39 pm
1.Consider again the OLG model . Explain briefly and clearly
(without algebra) why moving from a PAYG to a fully funded pension
system does not generate a Pareto improvement:
if 1 + r > (1 + a)(1 + n), even though the opposite is true,
that is, even though moving from a fully funded to PAYG system does
generate a Pareto improvement if 1+r < (1+a)(1+n). (We are of
course assuming that welfare is increasing in consumption.)
(without algebra) why moving from a PAYG to a fully funded pension
system does not generate a Pareto improvement:
if 1 + r > (1 + a)(1 + n), even though the opposite is true,
that is, even though moving from a fully funded to PAYG system does
generate a Pareto improvement if 1+r < (1+a)(1+n). (We are of
course assuming that welfare is increasing in consumption.)