Optimal pension funding with demographic instability and endogenous returns on investment

"This paper tries to explore some optimal funding policies for pension systems in a general equilibrium setting where funding affects returns on investment and wages through its impact on capital formation. This is done in the context of irregular demographic evolutions such as those expected in developed countries for the next century. Particular attention is given to the intergenerational welfare criterion which is used for designing optimal policies.... We will first present the model for the pension system and the economy and discuss a general one-parameter form for the intergenerational utility function. We will then present the simulated optimal paths for different numerical specifications of the model and the utility function. The last section will show by how much a simpler policy with fixed transfers and purely individual funding can depart from optimal paths...."