engleski

System Dynamics Approach to the Economic Aspects of Social Insurance in Transition Economies

Transition economies face the common problem regarding social insurance system, and one of them is tax avoidance. It is important to implement long term modelling because such behaviour could easily lead to the collapse of the social insurance system. Current modelling of pension systems is usually static and recursive, but in the same time, demographics, economic growth, real variables, and feedback effects are important for long term planning. A challenge in public policy making is a sensible social insurance system that offers benefits that are affordable in the short and long run and do not create serious adverse incentives for market work of for household saving. The paper argues that system dynamics can help to meet this challenge and avoid intuitively correct decision making that are actually result of “bounded rationality”. Dynamic model of Croatian social insurance system is used to illustrate the way of using system dynamic modelling as an aid in policy analysis and planning.

system dynamics; social insurance; modelling

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