This paper investigates the role of recent pension reforms for the development of the social security system and economic growth in Austria. We use a computable general equilibrium model that is built up of overlapping generations that differ by their household structure, longevity, educational attainment, and capital accumulation. Each household optimally decides over its consumption paths, work effort, and retirement age according to the life-cycle theory of labor, while they face survival risk. We find that the pension reforms implemented from 2000 to 2004, although in the correct direction, are not sufficient to solve the labor market distortion caused by the Austrian pay-as-you-go (PAYG) pension system. Using alternative policy options, our simulations indicate that a change to a notional defined contribution system and an increase in the educational distribution of the work force would increase the incentive for later retirement ages and thereby increase labor supply and economic growth.
COBISS.SI-ID: 21457638
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.
COBISS.SI-ID: 1672846
The article analyses the redistributive effect attained by personal income tax, social security contributions and social benefits in Slovenia and Croatia. The redistributive effect is decomposed first to reveal progressivity and horizontal inequity effects, and further to show contributions of different tax and benefit instruments. Even though both countries started from the same socioeconomic background two decades ago, the current results reveal divergence that is a consequence of diverse development during this period. The results indicate that Croatia experienced significantly higher pre-fiscal income inequality and lower redistributive effect than Slovenia. Horizontal inequity effects, though, were higher in Slovenia than in Croatia. In both countries, the means-tested social benefits exerted an over-proportionate influence on the vertical effect, suggesting a strong impact of the welfare state on income position of their residents, but also induced a large amount of horizontal inequity. In Slovenia, the non-means-tested benefits slightly increased income inequality.
COBISS.SI-ID: 1688974