Differentiating Indexation in Dutch Pension Funds

Funded social security programs are particularly vulnerable to economic and financial market shocks. As a consequence of the recent crisis, a large fraction of the Dutch pension funds had to submit restoration plans for the recovery of their buffers. Such plans will have to rely primarily on a mix of reduced benefit indexation and increased pension contributions. Hence, a discussion has emerged whether indexation should be differentiated across the various groups of participants in a pension fund. We investigate this issue numerically, developing an applied many-generation small open-economy OLG model with heterogeneous agents. The pension system consists of a first-pillar PAYG component and a second pillar with a pension fund. In our stochastic simulations, we hit the economy with a variety of unexpected demographic, economic and financial shocks. We compare uniform indexation of pension rights across all fund participants with alternatives such as status-contingent indexation in which pensions are protected against price inflation. While the aggregate welfare consequences are small, group-specific consequences are more substantial with the workers and future born losing and retirees benefitting from a shift away from uniform indexation. The exception is a scheme which links indexation directly to the fund’s asset performance. Under this scheme the retired benefit without other groups losing. The welfare effects are primarily the result of systematic welfare redistributions rather than of shifts in the benefits of risk sharing. Contribution rates always have to rise substantially from their initial levels to maintain the system’s sustainability. An increase in the retirement age that leaves existing pension rights untouched does little to avoid this rise with its adverse labour market consequences.     

Funded pensions and intergenerational and international risk sharing in general equilibrium

We explore intergenerational and international risk sharing in a general equilibrium multiple-country model with two-tier pensions systems. The exact design of the pension system is key for the way in which risks are shared over generations. The laissez-faire market solution fails to provide an optimal allocation because the young cannot share in the financial risks. However, the existence of wage-indexed bonds combined with a pension system with a fully funded second tier that pays defined wage-indexed benefits can reproduce the first best. If wage-indexed bonds are not available, mimicking the first best is not possible, except under special circumstances. We also explore whether national pension funds want to deviate from the first best by increasing domestic equity holdings. With wage-indexed bonds this incentive is absent, while there is indeed such an incentive when wage-indexed bonds do not exist.     

Reliability of registrations: a feasibility study into registration of occupational and educational titles in hospitals

Some results of an investigation are presented in which answers on some basic variables (occupation and education) are registered in several ways. The variables were measured in a setting in which the registration was to occur as fast as possible. All registrations went by using a computer. The registrations were checked a few weeks afterwards. This gives information about the reliability of the registrations. About 70% of those having a job reported the same occupation during the registration and the check. For educational level the same answer was given in about 80% of the cases. People not in the labour process reported both times nearly identical. Typing the labels resembles most the way employees at registration desks work. Choosing, however, from a list gives more reliable results. Causes of differences in assignments are discussed, and recommendations for improvement are given.     

The performance of a knowledge-based system for converting occupational classifications

In (mobility) research a lot of attention is given to models that are used. There is hardly attention for the way data are assigned to the categories as used in the comparisons. Assigning by human coders might cause a lot of errors. This is shown by the results of an experiment. As a first step to solve this problem, a knowledge-based system should be used to perform the conversion of the data. Some conversions in an existing system are investigated.     

The EU ETS and corporate environmental abatement

This article studies the relationship between firm-level emissions-to-cap ratio (ETC) and environmental abatement, by using a unique and extensive data set of 10 762 installations covered by the European Union Emission Trading Scheme (EU ETS) matched to 5931 firms. We find that a shortage of emissions allowances is related to more abatement in later years while a surplus of emissions allowances results in worse subsequent environmental performance. This finding underscores the importance of reducing the global amount of allowances in the ETS system. Our results also suggest that stakeholder pressure and the creation of transparency concerning corporate environmental performance are likely to support the effectiveness of the system.     

International Group Heterogeneity and Students’ Business Project Achievement

In business higher education, group project work plays an essential role. The purpose of the present study is to explore the relationship between the group heterogeneity of students’ business project groups and their academic achievements at both group and individual levels. The sample consists of 536 freshmen from an International Business School in a Dutch University. The research has revealed that students’ academic performances are positively correlated with their achievement in group projects at both individual and group levels. However, the group ethnic heterogeneity is negatively related with students’ project scores. The findings may enable education practitioners to gain more insights into students’ project work and manage students’ group work more effectively.