1. Why should the portfolios of mandatory, private pension funds be captive? (The foreign investment question)
- Author
-
Georges de Menil, Département et Laboratoire d'Economie Théorique et Appliquée (DELTA), École normale supérieure - Paris (ENS Paris), Université Paris sciences et lettres (PSL)-Université Paris sciences et lettres (PSL)-École des hautes études en sciences sociales (EHESS)-Centre National de la Recherche Scientifique (CNRS), Stern School of Business, New York University [New York] (NYU), NYU System (NYU)-NYU System (NYU), Centre National de la Recherche Scientifique (CNRS)-École des hautes études en sciences sociales (EHESS)-École normale supérieure - Paris (ENS Paris), and Université Paris sciences et lettres (PSL)-Université Paris sciences et lettres (PSL)
- Subjects
Economics and Econometrics ,Diversification (finance) ,Foreign investment limits ,Foreign direct investment ,Capital shortages ,Foreign portfolio investment ,Return on investment ,0502 economics and business ,JEL: J - Labor and Demographic Economics/J.J1 - Demographic Economics/J.J1.J14 - Economics of the Elderly • Economics of the Handicapped • Non-Labor Market Discrimination ,050207 economics ,Fund of funds ,Finance ,Pension ,050208 finance ,business.industry ,Social cost ,05 social sciences ,Pension funds ,Private pension ,JEL: O - Economic Development, Innovation, Technological Change, and Growth/O.O1 - Economic Development/O.O1.O16 - Financial Markets • Saving and Capital Investment • Corporate Finance and Governance ,[SHS.ECO]Humanities and Social Sciences/Economics and Finance ,JEL: H - Public Economics/H.H5 - National Government Expenditures and Related Policies/H.H5.H55 - Social Security and Public Pensions ,8. Economic growth ,Pension swaps ,JEL: J - Labor and Demographic Economics/J.J2 - Demand and Supply of Labor/J.J2.J26 - Retirement • Retirement Policies ,business - Abstract
A model of portfolio optimization, which takes account of the difference between the private and social cost of foreign investment, is used to analyze the relationship between capital shortages and the international diversification of mandatory, private pension funds in developing and transition countries. The socially optimal rate of foreign portfolio investment may be positive, even when access to international capital markets is limited. I propose replacing investment limits with a tax on foreign investments, equal to the difference between their social and private cost. The use of international pension swap is seen to be formally equivalent to the imposition of such a tax.
- Published
- 2005
- Full Text
- View/download PDF