Funded pensions and intergenerational and international risk sharing in general equilibrium

► We study risk sharing in a multi-country two-tier pension system. ► Under a laissez-fair market solution young cannot share in the financial risks. ► Two-tier system can mimic optimal international and intergenerational allocation. ► Wage-indexed bonds are necessary to replicate first-best allocation. ► Each country wants to deviate from the first best by holding more domestic equity.