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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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Verbic, Miroslav

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Abstract

The article presents an analysis of welfare effects in Slovenia, an analysis of macroeconomic effects of the Slovenian pension reform and an analysis of effects of the pension fund deficit on sustainability of Slovenian public finances with a dynamic OLG general equilibrium model. Stress was layed 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, the investment activity and thus the capital stock increased somewhat as well. Nevertheless, the long-term impact on the real GDP appeared to be ambiguous. Without doubt one has to take into account the demographic slowdown of GDP growth. Finally, tightening the parameters of the pension system substantially increased the long-term sustainability of the pension system; while lower indexation level of pension considerably decreased the deficit of the public pension fund, increase of retirement age was even able to delay the incidence of additional deficit.

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File URL: http://mpra.ub.uni-muenchen.de/10349/
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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 10349.

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Date of creation: Mar 2007
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Handle: RePEc:pra:mprapa:10349

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Related research
Keywords: general equilibrium models; indexation of pensions; macroeconomic effects; OLG-GE; PAYG; pension system; retirement age; Slovenia; welfare analysis;

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Find related papers by JEL classification:
E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
C68 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Computable General Equilibrium Models
H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving
D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models

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  1. Miroslav Verbič & Boris Majcen & Renger Van Nieuwkoop, 2006. "Sustainability of the Slovenian Pension System: An Analysis with an Overlapping-Generations General Equilibrium Model," Eastern European Economics, M.E. Sharpe, Inc., vol. 44(4), pages 60-81, August. [Downloadable!] (restricted)
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  2. 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. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Verbic, Miroslav, 2008. "The ageing population and the associated challenges of the Slovenian pension system," MPRA Paper 10347, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  2. Verbic, Miroslav, 2007. "Modelling the pension system in an overlapping-generations general equilibrium modelling framework," MPRA Paper 10350, University Library of Munich, Germany. [Downloadable!]
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