# 11-056/2/DSF19 (2011-03-17)

Roel Beetsma, University of Amsterdam, Netspar, CEPR, and CESifo; Ward Romp, University of Amsterdam, and Mn Services; Siert J. Vos, University of Amsterdam, and Netspar
participation constraints, funded pensions, intergenerational risk sharing
JEL codes:
C61, H55, J32

We explore the feasibility of a funded pension system with intergenerational risk sharing when participation in the system is voluntary. Typically, the willingness of the young to participate depends on their belief about the future young's willingness to do so. We characterise equilibria with voluntary participation and show that the likelihood of their existence increases with risk aversion and financial market uncertainty. We find that it is likely that mandatory participation is necessary to sustain a funded pension pillar and to let participants benefit from intergenerational risk sharing.

Published in the 'European Economic Review'.