Sensitivity of the Exporting Economy on the External Shocks: Evidence from Slovene Firms

In this paper we investigate the export participation of Slovene firms. We first show that sunk costs are an important factor for explaining the export behavior of Slovene firms. Next we show that when the absorption power of the exporting market declines, firms still trade with their established buyers (hysteresis) despite the fact that due to lower prices their exporting revenues decline. We show that this can be explained with high exit costs, which consist of switching costs (costs of replacing stable buyers with new ones) and cost of reducing the production (compensation money for excess workers) and high re-entry costs.http://deepblue.lib.umich.edu/bitstream/2027.42/40020/3/wp634.pd

Comonotonic approximations for a general pension problem

In this paper, we search for such an investment strategy that minimises the probability of default (or lifetime ruin probability) given a fixed investment amount during the accumulation phase and a fixed withdrawal rate during the annuitisation part. In solving the above-mentioned problem, we introduce a methodology that helps us to obtain a solution in analytical fashion without resorting to time consuming Monte Carlo (MC) simulation. More precisely, the existing methodology of conditioning Taylor approximation is used to find a solution by approximating the original sum via a comonotonic sum. More specifically, we searched for the optimal multi-period investment strategy of an investor whose accumulation phase (lasting M years) is followed by an annuitisation period (lasting N years). When choosing the optimal asset mix, we restricted our analysis to the class of constant mix dynamically rebalanced strategies, with optimisation criterion set to the probability of default. As it was shown by means of a numerical illustration, the solutions of our approximate procedure closely relate to the results of MC simulation.pension funds; sustainable investment strategy; financial models; probability of ruin; comonotonic approximations; modelling.

Retirement decisions in transition: microeconometric evidence from Slovenia

In this article we analyse old-age retirement decisions of Slovenian men and women eligible to retire in the period 1997-2003. In comparison with established market economies we find relatively high probabilities of retirement that decline with age. This unusual pattern can partly be attributed to weak incentives to work, inherent in the design of the pension system and reflected in predominantly negative values of accruals, and to transition-specific increase in wage inequality in the late 1980s and early 1990s. This is reflected in low wages and relatively high pensions of less productive (skilled) workers and vice versa. We find that the probability of retirement decreases with option value of work and net wages, although the response to the former, when controlling for the latter, is rather weak. Our results also imply that less educated individuals and individuals with greater personal wealth are more likely to retire. © 2013 Copyright Taylor and Francis Group, LLC.status: publishe

ADOPTION OF PROJECTED MORTALITY TABLE FOR THE SLOVENIAN MARKET USING THE POISSON LOG-BILINEAR MODEL TO TEST THE MINIMUM STANDARD FOR VALUING LIFE ANNUITIES

4siFor the best estimate of life annuity provisions, the longevity risk of the insured population must be estimated. In this article, we present an application of the Poisson logbilinear model to construct life annuity tables for the Slovenian market. As data on the selection effect of annuity owners are not available for the Slovenian market, we have used selection statistics from UK data. We then compare those tables with the German annuity tables DAV 1994 R, which are the current minimum standard for valuing annuity-related liabilities in Slovenia. It is shown that current minimum standard underestimate longevity risk of the insured population in Slovenia by 2–4%.noneopenMedved, Darko; Ahčan, Aleš; Sambt, Jože; Pitacco, ErmannoMedved, Darko; Ahčan, Aleš; Sambt, Jože; Pitacco, Ermann

Evolution of private returns to tertiary education during transition: evidence from Slovenia

This article analyses the evolution of private returns to tertiary education during the period of transition from a socialist to a market economy using the personal income tax data of all Slovenian workers employed between 1994 and 2008. We document a rich interplay between supply and demand in the labour markets of high school and university graduates. We show that, in spite of significant increases in the labour supply, the demand for university graduates outweighed this and increased the rates of return in the early period of transition (1994-2001), while in the later period (2001-08) the opposite was the case. We also provide evidence of considerable heterogeneity in rates of return between genders, levels and fields of study, with particularly large (low) returns to the fields that were suppressed (favoured) during socialism. These initial differences in returns have, however, gradually declined. © 2013 Copyright Taylor and Francis Group, LLC.status: publishe

Terminal wealth problem under uncertainty: how to choose the right asset mix in case of dependent random payments

We develop an approximate solution method for a classical saving for retirement problem in case of random payment scheme and value at risk (VaR) defined investor preferences. As the results of our numerical calculations indicate our approximate approach provides greater accuracy and reduces simulation time required for computing certain risk measures. One should note that our approximate approach is in no way restrictive and applies only to VaR defined preferences; our approximating sequence adequately describes the distribution function of terminal wealth, thus also making solutions accurate in case of utility defined preferences.financial models; approximating methods; savings; risk measurement; terminal wealth; wealth problems; uncertainty; asset mix; dependent payments; random payments; approximate solutions; retirement; value at risk; investor preferences; simulation times; risk measures; distribution function; utility defined preferences; sustainability; sustainable development; sustainable economy.