Valentina Vučković

University of Zagreb, Faculty of Economics and Business 

Zagreb, Croatia

E-mail: vvuckovic@net.efzg.hr

ORCID 0000-0002-5438-0665

The effect of emigration on financial and social pension system sustainability in EU new member states: Panel data analysis

Lorena Škuflić

University of Zagreb, Faculty of Economics and Business

Zagreb, Croatia

E-mail: lskuflic@net.efzg.hr

ORCID 0000-0002-2978-2902

Abstract. The paper brings the analysis of the emigration effects on financial and political sustainability of pension systems in 11 new European Union member states: Bulgaria, Estonia, Croatia, Latvia, Lithuania, Poland, Romania, Slovak Republic, Czech Republic, Slovenia and Hungary. The panel data analysis (fixed effects model) covers the crisis and post-crisis period from 2008 to 2017. The obtained results show that emigration growth is positively related to the pension expenditures (expressed as a share in GDP), thus having a negative impact on financial sustainability of pension system. On the other side, the emigration effect on social sustainability of pension system which is encompassed by the median relative income (65+) is not statistically significant. However, through including other socio-economic and political factors in econometric models besides the emigration (e.g. unemployment rate, education, political cycles, old-age dependency ratio, replacement ratio), the results have confirmed that there is a trade-off between the two goals of pension policies, i.e. between financial and political sustainability of pension system.

Received: January, 2020

1st Revision: March, 2021

Accepted: March, 2021

DOI: 10.14254/2071-789X.2021/14-1/10

JEL Classification: J11, H55

Keywords: emigration, pension system, pension expenditures, adequacy, median relative income