THE PENSION SYSTEM SUSTAINIBILITY IN KOSOVO
Keywords:
poverty, unemployment, pension system, fiscal effectsAbstract
Each country implies strategies with the aim to ensure social security for its citizens by including at-risk groups, people with health problems, the elderly and the unemployed. Consequently, in a way, the welfare of the society of a state is ensured by redistributing the income. Pension system is considered as one of the main strategies of social security that provides financial support for the elderly as well as for those who are unable to work. In the Balkan countries as well as in Kosovo, in general, pension benefits are the main source of income. However, the pension system in Kosovo is not stable due to numerous aggravating circumstances including low level of economic development, high unemployment rate and the consequences of the war. Thus, the aim of this paper is to propose a model of pension reform and to examine the fiscal effects in Kosovo. Additionally, this paper tends to present the effects on indicators of unemployment and poverty developments from the pension reforms in Kosovo after five, ten and twenty years. For this purpose, there is built a dynamic micro-simulation model, which simulates scenarios for pension system reforms in Kosovo. The model has a dynamic shape and involves the movement of individuals from the sample over a period of time as they get aged. In the model are considered the role of interpersonal relationships of individuals in the sample, behavioral responses and the effects of a change in them in labor market status within labor indicators (such as poverty and unemployment). Thus, the dynamic model creates a life path for each individual in the sample, including probability of death, change in economic status, retirement time, earnings, and so on. The pension system needs to undergo three structural reforms in order to achieve its fiscal consolidation in the next 5-10 years such as: reforms whose burden affects a key stakeholder (retirees or contributors), reforms where the burden is shared between generations and a reform where the burden is shared and changes are cascading and occurring gradually in a time horizon of 20 years
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