The Redistribution of Macroeconomic Risks by Dutch Institutions

31 Pages Posted: 9 Mar 2011 Last revised: 24 Apr 2011

See all articles by Thijs Knaap

Thijs Knaap

Algemene Pensioen Groep (APG)

Leon Bettendorf

CPB Netherlands Bureau of Economic Policy Analysis

Date Written: November 1, 2010

Abstract

We study the effects of macroeconomic shocks on different cohorts in the Dutch economy. From a calibrated stochastic model of macroeconomic risks, we derive typical shocks to productivity, demography and asset returns. The effects of these shocks are then simulated using an overlapping-generations model that contains a detailed specification of taxes, premiums, and benefits under Dutch law. We look at both the direct impact of shocks on agents wealth and at the redistribution and insurance that are carried out by the government and the pension system. While both these entities generally act to insure shocks across cohorts, our results show that the insurance role of the government is much larger than that of the occupational pension funds. We further find that there is little cross-correlation between different risks, except in the case of rare disasters.

Suggested Citation

Knaap, Thijs and Bettendorf, Leon, The Redistribution of Macroeconomic Risks by Dutch Institutions (November 1, 2010). Netspar Discussion Paper No. 11/2010-087, Available at SSRN: https://ssrn.com/abstract=1780932 or http://dx.doi.org/10.2139/ssrn.1780932

Thijs Knaap

Algemene Pensioen Groep (APG) ( email )

P.O. Box 75283
Amsterdam, 1070 AG
Netherlands

Leon Bettendorf (Contact Author)

CPB Netherlands Bureau of Economic Policy Analysis ( email )

P.O. Box 80510
2508 GM The Hague, 2585 JR
Netherlands

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