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Varying the Parameters of the Slovenian Pension System: an Analysis with an Overlapping-Generations General Equilibrium Model

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  • Miroslav Verbic

Abstract

This article presents an analysis of welfare effects in Slovenia, macroeconomic effects of the Slovenian pension reform and effects of the pension fund deficit on the sustainability of Slovenian public finances using a dynamic OLG general equilibrium model. Stress was laid upon varying two parameters of the current pension system: the age of retirement and the indexation rate of pensions. It was established that by tightening these parameters the elderly would lose, while the present and future generations would gain. The macroeconomic effects were in accordance with expectations; the employment level increased, while the effects of tightened parameters on real consumption were negative. Since the PAYG burden on incomes decreased, investment and thus the capital stock increased somewhat as well. Nevertheless, the long-term impact on real GDP appeared to be ambiguous. Without doubt the demographic slowdown of GDP growth has to be taken into account. Finally, tightening the parameters of the pension system substantially increased its long-term sustainability: while a lower indexation level of pensions considerably decreased the deficit of the public pension fund, increasing the retirement age was even able to delay the incidence of additional deficit.

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File URL: http://www.tandfonline.com/doi/abs/10.1080/14631370701680154
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Post-Communist Economies.

Volume (Year): 19 (2007)
Issue (Month): 4 ()
Pages: 449-470

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Handle: RePEc:taf:pocoec:v:19:y:2007:i:4:p:449-470

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  1. Modigliani, Franco, 1986. "Life Cycle, Individual Thrift, and the Wealth of Nations," American Economic Review, American Economic Association, vol. 76(3), pages 297-313, June.
  2. Miroslav Verbic & Boris Majcen & Renger van Nieuwkoop, 2005. "Sustainability of the Slovenian Pension System: An Analysis with an Overlapping-generations General Equilibrium Model," GE, Growth, Math methods 0507010, EconWPA.
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Cited by:
  1. Miroslav Verbič & Boris Majcen & Olga Ivanova & Mitja Čok, 2011. "R&D and Economic Growth in Slovenia: A Dynamic General Equilibrium Approach with Endogenous Growth," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 58(1), pages 67-89, March.
  2. Verbic, Miroslav, 2008. "The ageing population and the associated challenges of the Slovenian pension system," MPRA Paper 10347, University Library of Munich, Germany.
  3. Sašo Polanec & Aleš Ahčan & Miroslav Verbič, 2013. "Retirement decisions in transition: microeconometric evidence from Slovenia," Post-Communist Economies, Taylor & Francis Journals, vol. 25(1), pages 99-118, March.
  4. Verbic, Miroslav, 2007. "Modelling the pension system in an overlapping-generations general equilibrium modelling framework," MPRA Paper 10350, University Library of Munich, Germany.
  5. Cok, Mitja & Sambt, Joze & Kosak, Marko & Verbic, Miroslav & Majcen, Boris, 2011. "Distribution of personal income tax changes in Slovenia," MPRA Paper 32704, University Library of Munich, Germany.

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