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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.

Suggested Citation

  • Miroslav Verbic, 2007. "Varying the Parameters of the Slovenian Pension System: an Analysis with an Overlapping-Generations General Equilibrium Model," Post-Communist Economies, Taylor & Francis Journals, vol. 19(4), pages 449-470.
  • Handle: RePEc:taf:pocoec:v:19:y:2007:i:4:p:449-470 DOI: 10.1080/14631370701680154
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    References listed on IDEAS

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    1. Rutherford, Thomas F., 1995. "Extension of GAMS for complementarity problems arising in applied economic analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 19(8), pages 1299-1324, November.
    2. Modigliani, Franco, 1986. "Life Cycle, Individual Thrift, and the Wealth of Nations," American Economic Review, American Economic Association, pages 297-313.
    3. Böhringer, Christoph & Rutherford, Thomas Fox & Wiegard, Wolfgang, 2003. "Computable general equilibrium analysis: Opening a black box," ZEW Discussion Papers 03-56, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    4. Miroslav VerbiÄ & Boris Majcen & Renger Van Nieuwkoop, 2006. "Sustainability of the Slovenian Pension System: An Analysis with an Overlapping-Generations General Equilibrium Model," Eastern European Economics, Taylor & Francis Journals, pages 60-81.
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    Citations

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    Cited by:

    1. Sašo Polanec & Aleš Ahčan & Miroslav Verbič, 2013. "Retirement decisions in transition: microeconometric evidence from Slovenia," Post-Communist Economies, Taylor & Francis Journals, pages 99-118.
    2. Miroslav Verbič & Rok Spruk, 2014. "Aging Population and Public Pensions: Theory and Macroeconometric Evidence," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, pages 289-316.
    3. 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, pages 67-89.
    4. Mitja Čok & Jože Sambt & Marko Košak & Miroslav Verbič & Boris Majcen, 2011. "Distribution of personal income tax changes in Slovenia," Post-Communist Economies, Taylor & Francis Journals, pages 503-515.
    5. Mitja Čok & Jože Sambt & Marko Košak & Miroslav Verbič & Boris Majcen, 2011. "Distribution of personal income tax changes in Slovenia," Post-Communist Economies, Taylor & Francis Journals, pages 503-515.
    6. Verbic, Miroslav, 2007. "Modelling the pension system in an overlapping-generations general equilibrium modelling framework," MPRA Paper 10350, University Library of Munich, Germany.
    7. Joze Sambt & Janez Malačič, 2011. "Slovenia: independence and the return to the family of European market economies," Chapters,in: Population Aging and the Generational Economy, chapter 17 Edward Elgar Publishing.
    8. Miroslav Verbic, 2008. "The Ageing Population and the Associated Challenges of the Slovenian Pension System," Financial Theory and Practice, Institute of Public Finance, vol. 32(3), pages 321-338.
    9. 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, pages 67-89.

    More about this item

    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; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • 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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