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Modelling the pension system in an overlapping-generations general equilibrium modelling framework

Miroslav Verbič

MPRA Paper from University Library of Munich, Germany

Abstract: This article presents a theoretical contribution to the field of overlapping-generations general equilibrium modelling, i.e. an upgrade of this branch of models with a pension system. Within the pension block we model both the first pension pillar, financed on a pay-as-you-go basis, and the fully-funded second pillar of the Slovenian pension system. The modelling of the first pension pillar is based on cash flows of the mandatory pension insurance institution, the relationship between the pension base and the pension, and the process of harmonising pension growth to wage growth. The modelling of the second pillar centres on implementation of the liquidity constraint. Use was made of supplementary pension profiles, and the ratio between premia paid and pensions paid out from supplementary pension insurance. The category of total pension was also introduced, and the model ensured that at every point households adjusted the scope of labour supply and their current consumption towards the target total pension.

Keywords: first pension pillar; general equilibrium models; liquidity constraint; MCP; overlapping generations; PAYG; pension system; second pension pillar (search for similar items in EconPapers)
JEL-codes: C68 D58 D91 H55 (search for similar items in EconPapers)
Date: 2007-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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