Pareto improving financial innovation in incomplete markets

1998 ◽  
Vol 11 (3) ◽  
pp. 467-494 ◽  
Author(s):  
David Cass ◽  
Alessandro Citanna
Keyword(s):  
Incomplete Markets ◽  
Financial Innovation ◽  
Pareto Improving

scholarly journals Pareto-Improving Social Security Reform when Financial Markets Are Incomplete!?

2006 ◽  
Vol 96 (3) ◽  
pp. 737-755 ◽  
Author(s):  
Dirk Krueger ◽  
Felix Kubler
Keyword(s):  
Social Security ◽  
Financial Markets ◽  
Incomplete Markets ◽  
Labor Income ◽  
Crowding Out ◽  
Pareto Improvement ◽  
Overlapping Generations Model ◽  
Stochastic Production ◽  
Unfunded Social Security ◽  
Pareto Improving

This paper studies an overlapping generations model with stochastic production and incomplete markets to assess whether the introduction of an unfunded social security system leads to a Pareto improvement. When returns to capital and wages are imperfectly correlated, a system that endows retired households with claims to labor income enhances the sharing of aggregate risk between generations. Our quantitative analysis shows that, abstracting from the capital crowding-out effect, the introduction of social security represents a Pareto-improving reform, even when the economy is dynamically efficient. However, the severity of the crowding-out effect in general equilibrium tends to overturn these gains.

The Value of Financial Innovation

CFA Magazine ◽  
2012 ◽  
Vol 23 (4) ◽  
pp. 36-39
Author(s):  
Jonathan Barnes
Keyword(s):  
Financial Innovation
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