Description
In many countries, population ageing implies an implicit public debt. This paper explores which policies should be reformed to pay off this debt, when reforms should be made and how different generations should contribute to the debt pay-off. The analysis distinguishes between two types of demographic shocks (a longevity boost and a fertility bust). It concludes that reforms should be implemented immediately when information about future demographic changes becomes available.This involves a rise of taxes, lower transfers to the elderly and lower consumption of the rival and public good, both in the short and the long run, with one exception: in the long run, consumption of the pure public good may increase in case of a longevity boost.
The currently old generation shares less in the fiscal burden because it escapes tax increases. Future generations share less (more) in the burden in case of a longevity boost (a fertility bust) due to the increase (decrease) in consumption of the pure public good over time. The public debt should be decreased in anticipation of ageing in case of a longevity boost, but may imply an increase of the public debt in case ageing takes the form of a fertility bust.
| Period | 13 Mar 2017 |
|---|---|
| Held at | Fiscal Institute Tilburg (FIT) |