Slovenia from socialism to the market economy: rapidly increasing dependence on intergenerational (public) transfers

Tanja Istenic, University of Ljubljana
Joze Sambt, University of Ljubljana

Rapid population ageing puts increasing importance on economic flows across age and intergenerational transfers in general. In this paper we employ the National Transfer Accounts (NTA) methodology measuring consumption and production at each age and how the difference between those two is financed through (private and public) transfers and interaction with assets (the “asset-based reallocations”). During working ages people produce more than they consume. This surplus enables them to finance the deficit of the young and old generations who consume more than they produce. Such a pattern of economic dependency is quite general across countries and times, but there can be large differences at which ages individuals are dependents and at which supporters. Also, the importance of private transfers, public transfers and asset based reallocation varies across countries and times. In the past three decades the life expectancy at birth in Slovenia has increased rapidly, however the period where production exceeds consumption has shrunk rather than prolong. While children predominantly depend on private transfers, the elderly mainly rely on publicly provided transfers. Despite the increasing pressure on the sustainability of public finances, for both the young and the elderly, the share of private transfers decreases and they more and more rely on public transfers. Together with the rapid population ageing this will probably severely jeopardize the public finance system in the future.