In this article, we analyse old-age retirement decisions of Slovenian men and women, eligible to retire in the period 1997-2003. In comparison to established market economies, we find relatively high hazard rates of retirement that decline with age. This unusual pattern can partly be attributed to weak incentives to work, inherent in the design of the pension system and reflected in predominantly negative values of accruals, and to transition-specific increase in wage inequality in the late 1980s and early 1990s. This is reflected in low wages and relatively high pensions of less productive (skilled) workers and vice versa. We find that the probability of retirement decreases with option value to work and net wages, although the response to the former, when controlling for the latter, is rather weak. Our results also imply that less educated individuals and individuals with greater personal wealth are more likely to retire.
F.02 Acquisition of new scientific knowledge
COBISS.SI-ID: 1672846Economic sustainability and adequacy of social security systems is under severe pressure nowadays. A number of studies prepared for Slovenia during the last five years clearly show that the on-going pension reform will not be enough to compensate negative effects of demographic changes after 2025. Sustainability of the public finance and pension system will therefore steadily deteriorate, reaching one of the highest public finance deficits among the EU member countries. Reforms in the areas of pension system, health care and long term care systems, the system of social transfers, education and labour market are inevitable. Modelling at the micro level facilitates policy simulations at any level of detail as tax, benefit, and social security regulations are defined at the individual or family level. As the rules are usually complex and depend nonlinearly on various characteristics (like family composition or income), microsimulation is often the only way to study the distributional impact and long-term sustainability of such systems. Two microsimulation models were developed for Slovenia in last several years: 1) the static tax-benefit model and 2) the pension microsimulation model with static aging. Due to their (mostly) static nature, they do not allow complete analyses of future pension reforms. Therefore the development of the first dynamic microsimulation model in Slovenia (DYPENSI) is a natural move of recent activities to more complex modelling tools. The main aim of the proposed paper is to describe a construction of the dynamic microsimulation pension model for Slovenia DYPENSI. DYPENSI is being constructed in Modgen, a generic microsimulation programming language developed by Statistics Canada and is modularly organized (demographic modules, labour market modules and pension modules). The paper will focus on the structure of the model, the rationale behind the choices in the process of DYPENSI development and future plans.
B.03 Paper at an international scientific conference
COBISS.SI-ID: 1705870The paper summarizes research activities performed during the upgrading of the static tax-benefit micro-simulation model by adding the dynamic dimension and creating the possibility of the construction of a new module: a pension micro-simulation model. The system of linked databases has been successfully established and institutionalized. The Statistical Office committed itself to the maintaining and updating of these linked databases on a regular four-year-interval basis. This is a significant achievement, since it has been accomplished for the first time in Slovenia. The linked databases, now finally available to a wider research community in Slovenia, allowed for the creation of the first dynamic micro-simulation pension model in Slovenia. The new dynamic framework has been developed for the existing static micro-simulation model. A demographic module with weights generating a sub-module, as well as income tax and economic modules were developed. The dynamic framework introduced a time dimension into the static pension model, thus providing a much better tool for the assessment of alternative pension reform proposals. This is an important step towards development of the fully dynamic pension model. The new tool within the graphic interface enables the interested ministries to use the model on their own in preparing various projections and scenarios in the area of demography, income tax system, social security contributions system, pensions system, health and long term care system, and long term sustainability of public finances. The newly constructed dynamic micro-simulations model was already used for the preparation of the pension reform proposal in 2012, and namely for estimating the effects of alternative pension reform scenarios, thereby making the process of structural reforms more science-based and consistent.
B.03 Paper at an international scientific conference
COBISS.SI-ID: 1706126Rapid population aging driven by low fertility and increasing longevity requires further adjustments of the traditional pension frameworks in Central and Eastern Europe (CEE). In this article we analyze the pension systems of the Czech Republic, Hungary, Poland, Slovakia, and Slovenia and show firstly that fiscal limitations are expected to significantly reduce PAYG pensions in CEE countries given the current and projected demographic dynamics. Secondly, we show that existing private pension plans will not be able to fill the gap to the desirable replacement rate. Without implementation of additional pension saving plans during the active period, there is a threat that many individuals will fall below the poverty line after retirement. Thirdly, we argue that the success of such pension plans will crucially depend on asset allocation decisions. Hence, governments should implement financial literacy programs in order to promote less conservative, more profitable asset allocation decisions by individuals over the longer run.
F.30 Professional assessment of the situation
COBISS.SI-ID: 21667558Assumptions about the future development of people’s longevity have a crucial impact on the long-term sustainability of the public pension system. The use of standard methods to estimate longevity has led to systematically underestimates of increase in longevity. In the paper the Lee–Carter (LC) model to forecast demographics projections for the Slovenian population is used. Using this approach the results are much closer to the actual development of mortality. The assumptions about people’s longevity made in the latest Eurostat projections still project somewhat lower increases in longevity than in the paper obtained results using LC model. This translates to about 0.9 percentage point higher share of public pension expenditure in GDP in 2060 compared to the results if Eurostat assumptions about longevity are used.
F.16 Improvements to an existing information system/databases
COBISS.SI-ID: 20498662