Defined benefit pension schemes: A welfare analysis of risk sharing and labour market distortions

D.A.G. Draper, Ed Westerhout, A.G.H. Nibbelink

Research output: Contribution to journalArticleScientificpeer-review

1 Citation (Scopus)

Abstract

Traditionally, collective defined benefit pension schemes have played an important role in the provision of pensions. Various trends such as population ageing put these schemes under serious pressure, however. Whether this is good or bad depends among other things on two factors: one is the value of the risk sharing between generations that is organized by pension schemes, and another is the cost of the distortions of labour supply decisions that these collective schemes imply. This paper constructs a model with overlapping generations of households and a pension scheme to assess the role of these two factors. The paper finds that the welfare gain from intergenerational risk sharing generally dominates the cost of labour supply distortions.
Original languageEnglish
Article number16
Pages (from-to)467-484
Number of pages18
JournalJournal of Pension Economics and Finance
Volume16
Issue number4
DOIs
Publication statusPublished - Oct 2017

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