The political economy of a changing population

R.M.W.J. Beetsma

Research output: Working paperDiscussion paperOther research output

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Abstract

In the context of an overlapping generations model with intragenerational inequality and majority voting, I study how the taxation of the old and retired generation is affected when the population growth rate changes. A fall in the birth rate leads to two opposite effects. On the one hand, the old generation acquires more political power because their relative size in the voting population increases. This exerts downward pressure on the taxation of the old. On the other hand, the tax burden on the young (used to repay the public debt held by the old) increases, so that their support for a low tax rate on assets held by the old decreases. In general, the number of equilibria is either zero or two, one of which involves zero taxation while the other involves partial taxation of the assets held by the old.
Original languageEnglish
PublisherUnknown Publisher
Number of pages8
Volume1995-11
Publication statusPublished - 1995

Publication series

NameCentER Discussion Paper
Volume1995-11

Fingerprint

Taxation
Political economy
Assets
Tax burden
Tax rate
Birth rate
Overlapping generations model
Majority voting
Population growth
Political power
Voting
Public debt

Keywords

  • Macroeconomic Models
  • Taxation
  • Population Dynamics
  • Voting
  • Ageing
  • macroeconomics

Cite this

Beetsma, R. M. W. J. (1995). The political economy of a changing population. (CentER Discussion Paper; Vol. 1995-11). Unknown Publisher.
Beetsma, R.M.W.J. / The political economy of a changing population. Unknown Publisher, 1995. (CentER Discussion Paper).
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Beetsma, RMWJ 1995 'The political economy of a changing population' CentER Discussion Paper, vol. 1995-11, Unknown Publisher.

The political economy of a changing population. / Beetsma, R.M.W.J.

Unknown Publisher, 1995. (CentER Discussion Paper; Vol. 1995-11).

Research output: Working paperDiscussion paperOther research output

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N2 - In the context of an overlapping generations model with intragenerational inequality and majority voting, I study how the taxation of the old and retired generation is affected when the population growth rate changes. A fall in the birth rate leads to two opposite effects. On the one hand, the old generation acquires more political power because their relative size in the voting population increases. This exerts downward pressure on the taxation of the old. On the other hand, the tax burden on the young (used to repay the public debt held by the old) increases, so that their support for a low tax rate on assets held by the old decreases. In general, the number of equilibria is either zero or two, one of which involves zero taxation while the other involves partial taxation of the assets held by the old.

AB - In the context of an overlapping generations model with intragenerational inequality and majority voting, I study how the taxation of the old and retired generation is affected when the population growth rate changes. A fall in the birth rate leads to two opposite effects. On the one hand, the old generation acquires more political power because their relative size in the voting population increases. This exerts downward pressure on the taxation of the old. On the other hand, the tax burden on the young (used to repay the public debt held by the old) increases, so that their support for a low tax rate on assets held by the old decreases. In general, the number of equilibria is either zero or two, one of which involves zero taxation while the other involves partial taxation of the assets held by the old.

KW - Macroeconomic Models

KW - Taxation

KW - Population Dynamics

KW - Voting

KW - Ageing

KW - macroeconomics

M3 - Discussion paper

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Beetsma RMWJ. The political economy of a changing population. Unknown Publisher. 1995. (CentER Discussion Paper).