Saving and Investing Over the Life Cycle and the Role of Collective Pension Funds |
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Authors: | Lans Bovenberg Ralph Koijen Theo Nijman Coen Teulings |
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Institution: | (1) Netspar and Tilburg University, P.O. Box 90153, 5000 LE Tilburg, The Netherlands;(2) Netspar and University of Amsterdam, Roetersstraat 29, 1018 WB Amsterdam, The Netherlands |
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Abstract: | Summary This paper surveys the academic literature on optimal saving and investment over an individual’s life cycle. We start out
with a simple benchmark model with separable and smooth preferences, one aggregate risk factor and riskless wage income. Within
this simple setting, optimal saving and investment behavior are explored from the perspective of individuals. Subsequently,
we investigate various constraints to optimal individual decision making. We discuss how collective pension schemes may help
to relieve some of the market incompleteness that arises from these constraints while at the same time introducing new types
of constraints. Finally, various extensions to the benchmark setting are analyzed: a more elaborate modelling of human capital,
additional risk factors, and other types of preferences.
We thank Peter Kooreman for helpful comments on an earlier version and Roel Mehlkopf for research assistance. |
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Keywords: | saving investment life cycle pension schemes defined contribution defined benefit |
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