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.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: general equilibrium models; mandatory second pillar; macroeconomic effects; OLG-GE; Slovenia; supplementary pension saving; welfare analysis
• Subjects: H - Public Economics > H5 - National Government Expenditures and Related Policies > H55 - Social Security and Public Pensions; C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C68 - Computable General Equilibrium Models; G - Financial Economics > G2 - Financial Institutions and Services > G23 - Non-bank Financial Institutions ; Financial Instruments ; Institutional Investors; J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J32 - Nonwage Labor Costs and Benefits ; Retirement Plans ; Private Pensions; D - Microeconomics > D9 - Intertemporal Choice > D91 - Intertemporal Household Choice ; Life Cycle Models and Saving; D - Microeconomics > D5 - General Equilibrium and Disequilibrium > D58 - Computable and Other Applied General Equilibrium Models

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