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Supplementary pension insurance in Slovenia: an analysis with an overlapping-generations general equilibrium model

Verbic, Miroslav (2007): Supplementary pension insurance in Slovenia: an analysis with an overlapping-generations general equilibrium model.

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Abstract

The article presents an analysis of supplementary pension insurance in Slovenia and its subsequent effects on welfare, macroeconomic variables and pension fund deficit with a dynamic OLG general equilibrium model. It has been established that the volume of supplementary pension saving is insufficient at present in Slovenia to compensate the deterioration of rights from the first pension pillar. Not only is the participation in the (voluntary) second pillar insufficient, but especially the premia are too low. The macro-economic consequences of introducing a fully-funded mandatory component of pension insurance would not be unfavourable. Increased pension saving reduces current consumption and increases the labour supply of active generations, but also increases the volume of disposable savings, so the increased investment may increase capital stock and production, which leads to an increase in economic growth and potential future consumption. Increased labour supply of insured persons would also lead to a higher volume of contributions for mandatory pension insurance, which would reduce the state pension fund deficit.

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