Population uncertainty, social insurance

Uncertainty in the size of the working population leads to uncertainty in wages and in the return to capital, and to the possible desirability of an insurance contract between unborn workers and future retirees. However Green (1977, 1988) finds that an insurance contract is unlikely to benefit both generations. We show that a worker has two potential sources of actuarial bias: Green's result is due to workers in his model being of different types and some workers having only one source of bias. A representative worker must have both sources of bias, and an insurance contract will benefit both generations. The results are generalized. © 1992.