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Population Aging and Public Finances: Evidence from El Salvador

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  • Peña, Werner

Abstract

This paper analyses the impact of population aging on the demand for social resources in El Salvador and discusses the implications in terms of public finances. The empirical contribution of the paper is twofold: first, an estimation of the fiscal dividend is presented to highlight the importance for El Salvador of adopting fiscal policies in the short and medium term in a context of demographic transition; second, a long-term budget projection is produced to assess how population aging will put pressure on government budgets. The paper shows that with the combination of reasonable fiscal policies aimed at increasing revenues and reducing expenditures, El Salvador could cut by almost a half the hypothetical debt burden resulting from not adopting fiscal measures to affront the demographic change. The results emphasize the importance for Latin American developing countries of exploring different fiscal policies to ensure the sustainability of public finances in the medium and long term.

Suggested Citation

  • Peña, Werner, 2020. "Population Aging and Public Finances: Evidence from El Salvador," The Journal of the Economics of Ageing, Elsevier, vol. 17(C).
    • Handle: RePEc:eee:joecag:v:17:y:2020:i:c:s2212828x20300256
    DOI: 10.1016/j.jeoa.2020.100260
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    References listed on IDEAS

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    1. Coleen Wilder & Sailu Li, 2019. "Case Article—You Can’t Take It with You," INFORMS Transactions on Education, INFORMS, vol. 20(1), pages 33-36, September.
    2. Prettner, Klaus & Bloom, David E. & Strulik, Holger, 2013. "Declining fertility and economic well-being: Do education and health ride to the rescue?," Labour Economics, Elsevier, vol. 22(C), pages 70-79.
    3. Ronald Lee & Andrew Mason (ed.), 2011. "Population Aging and the Generational Economy," Books, Edward Elgar Publishing, number 13816.
    4. Mauricio Cardenas & Rafael De Hoyos & Miguel Szekely, 2015. "Out-of-School and Out-of-Work Youth in Latin America: A Persistent Problem in a Decade of Prosperity," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Fall 2015), pages 1-40, October.
    5. Peña, Werner & Rivera, María Elena, 2018. "Dividendo demográfico y migración en El Salvador: ¿cuánto se ha perdido?," Notas de Población, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), June.
    6. Bernardo L. Queiroz, 2014. "National Transfer Accounts and Generational Flows," Poverty In Focus 30, International Policy Centre for Inclusive Growth.
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    Cited by:

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    2. Liudmila Reshetnikova & Natalia Boldyreva & Maria Perevalova & Svetlana Kalayda & Zhanna Pisarenko, 2021. "Conditions for the Growth of the “Silver Economy” in the Context of Sustainable Development Goals: Peculiarities of Russia," JRFM, MDPI, vol. 14(9), pages 1-18, August.

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    More about this item

    Keywords

    Demographic Economics; Population Aging; Fiscal Dividend; Budget Projection; Debt Sustainability;
    All these keywords.

    JEL classification:

    • H68 - Public Economics - - National Budget, Deficit, and Debt - - - Forecasts of Budgets, Deficits, and Debt
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy

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