December 2024
13Dec

Private Equity for Pension Plans? Evaluating Private Equity Performance from an Investor’s Perspective

By Arthur Korteweg, Stavros Panageas & Anand Systla We evaluate private equity (PE) performance using investor-specific stochastic discount factors, and examine whether investors could benefit from changing their allocation to PE. Plans invest in PE funds with higher average risk-adjusted performance. This is mainly due to access to successful PE managers, not superior selection skill. Decomposing returns into risk-compensation and "alpha", we find that some plans obtain higher PE returns by taking more risk without earning higher, and in some cases earning lower,...

December 13, 2024
Articles, Investment, , , ,
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13Dec

Do Pensions Enhance Worker Effort and Selection? Evidence from Public Schools

By Michael Bates & Andrew C. Johnston Why do employers offer pensions? We empirically examine two theoretical rationales, namely that pensions improve worker effort and worker selection. We test these hypotheses using rich administrative measures on effort and output for teachers around the pension-eligibility notch. When workers cross the notch, their effective compensation falls by roughly 50 percent of salary, but we observe no reduction in worker effort or output. This implies that pension payments do not increase effort. As for selection, we find...

December 13, 2024
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13Dec

The Economics of Net Zero Banking

By Adair Morse & Parinitha R. Sastry Banks have voluntarily committed to align their lending portfolios with a net zero path toward a decarbonized economy. In this review, we explore the economic channels for why portfolio decarbonization might be consistent with lender profit maximization. We frame the question by positing that net zero lending may create differential value through the channels of risk and returns, where return topics span profit margins and lending book growth arguments. We then use the lens of...

December 13, 2024
Articles, Pension Management, , ,
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06Dec

Household Saving in Japan: The Past, Present, and Future

By Charles Yuji Horioka This paper explores the determinants of the level of, and trends over time in, Japan’s household saving rate, with emphasis on the impact of the age structure of the population, and makes projections about future trends therein. The paper finds that Japan’s household saving rate has not always been high either absolutely or relative to other countries and that it was only during the 1961-86 period that it exceeded 15%. Past and future trends in Japan’s...

December 6, 2024
Articles, Savings, ,
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06Dec

Fintech, Visual Attention, and Financial Inclusion: A Field Experiment on Migrant Remittances

By Eduardo Nakasone, Máximo Torero & Angelino Viceisza Migrant remittances are significant but remain relatively costly to send. Policymakers have argued that fintech, specifically, comparison websites like kayak.com but for sending money, can boost financial inclusion and reduce remittance prices. Yet, little is known about how migrants with limited education and trust in digital methods interact with fintech. We conduct a field experiment on a comparison website and vary remittance-company attributes shown to migrants, specifically, the time for delivery and...

December 6, 2024
Articles, System Characterization, , ,
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06Dec

Retirement Incentives and Decisions across the Income Distribution: Evidence in Canada

By Kevin S. Milligan & Tammy Schirle We evaluate the retirement incentives embedded in Canada’s retirement income system with attention to where individuals are located in the income distribution. We find that larger social security benefits are available to individuals with lower earnings in their work history because of the benefit income tests, but those from the top of the income distribution tend to enjoy longer lives over which they may receive benefits. Overall, we see greater Social Security Wealth...

December 6, 2024
Articles, Pension design, , ,
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November 2024
29Nov

Financial Inclusion and the Informal Sector

By Noha Emara, Freddy Cama & Mohamed Trabelsi This paper explores the relationship between the informal sector and financial inclusion for a sample of 186 countries across the period 2004-2018 and using various methods of estimations—ordinary least squares, instrumental variables, fixed effects, and general method of moments. The results show financial inclusion significantly reduces the size of the shadow economy with all indicators of access and usage of financial services. The result is also robust when considering the income level,...

November 29, 2024
Articles, Pension design, ,
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29Nov

Pension Liquidity Risk

By Kristy Jansen, Sven Klingler, Angelo Ranaldo & Patty Duijm Pension funds rely on interest rate swaps to hedge the interest rate risk arising from their liabilities. Analyzing unique data on Dutch pension funds, we show that this hedging behavior exposes pension funds to liquidity risk due to margin calls, which can be as large as 15% of their total assets. Our analysis uncovers three key findings: (i) pension funds with tighter regulatory constraints use swaps more aggressively; (ii) in...

November 29, 2024
Articles, Pension design, , , ,
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29Nov

Chinese Pension Insurance, Risk Attitudes, and Household Asset Allocation

By Hua Chen, Han Xiao, Yunxiao Guo & Ding Li Optimising household asset allocation is vital for expanding domestic demand in developing countries. This study uses 2017, 2019, and 2021 China Household Finance Survey (CHFS) data to explore pension insurance's effect on asset allocation among Chinese households. Key findings include that higher pension balances encourage investments in riskier assets. Specifically, for every 10% increase in pension account balances, the likelihood of investing in the risk asset market rises by 5%, and...

November 29, 2024
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22Nov

Financial Inclusion and Wellbeing

By Abigail Hiller The researchers then use their index to analyze the extent of financial exclusion across the US as well as its effects on households. They find that households in areas with greater financial inclusion tend to have higher incomes and are more likely to own homes and possess real estate wealth. Greater financial inclusion is associated with a higher probability of creating an estate, building intergenerational wealth, and breaking the poverty cycle among married individuals and those with...

November 22, 2024
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