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Population Ageing, Taxation, pensions and Health Costs

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  • Patricia Apps

    ()
    (University of Sydney)

  • Ray Rees

    (University of Munich)

Abstract

This paper argues against the policy position that begins with a doomsday scenario of publicly provided health insurance and pension systems threatened with collapse under the stresses imposed by population ageing, and instead contends that the threat of crisis in these systems is policy driven. The central thesis of the paper is that a range of policies lead to the creation of an ageing crisis by inhibiting the efficient reallocation of female labour from the home to the market in response to the decline in fertility. The analysis focuses on family support policies that create large effective tax burdens on female labour supply, by means testing the support on family income, or selectively on the second income. Examples include Family Tax Benefit Part A and Part B, the Medicare Levy and the Medicare Safety Net. The analysis draws on household survey data to show that female labour supply is strongly positively associated with household saving, the purchase of private health insurance and spending on family health generally. Policies that inhibit female labour supply therefore have the effect of reducing the tax base for funding public pensions and health care, while simultaneously reducing the capacity of families to fund them privately.

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Bibliographic Info

Article provided by Bankwest Curtin Economics Centre (BCEC), Curtin Business School in its journal Australian Journal of Labour Economics.

Volume (Year): 10 (2007)
Issue (Month): 2 (June)
Pages: 79-97

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Handle: RePEc:ozl:journl:v:10:y:2007:i:2:p:79-97

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Web page: http://business.curtin.edu.au/research/publications/journals/ajle/
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Keywords: Household Behavior and Family Economics; Health; Government Policy; Regulation; Public Health; Retirement; Retirement Policies;

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References

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  1. Cutler, D.M. & Poterba, J.M. & Sheiner, L.M. & Summers, L.H., 1990. "An Aging Society: Opportunity Or Challenge," Working papers 553, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. Sheetal K. Chand & Albert Jaeger, 1996. "Aging Populations and Public Pension Schemes," IMF Occasional Papers 147, International Monetary Fund.
  3. Joseph P. Newhouse, 1992. "Medical Care Costs: How Much Welfare Loss?," Journal of Economic Perspectives, American Economic Association, vol. 6(3), pages 3-21, Summer.
  4. Kees van Gool & Elizabeth Savage & Rosalie viney & Marion Haas & Rob Anderson, 2006. "Catastrophic insurance: Impact of the Australian Medicare Safety Net on fees, service use and out-of-pocket costs, CHERE Working Paper 2006/9," Working Papers 2006/9, CHERE, University of Technology, Sydney.
  5. David Cutler & Angus Deaton & Adriana Lleras-Muney, 2005. "The Determinants of Mortality," Working Papers 164, Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies..
  6. Patricia Apps & Ray Rees, 2005. "Gender, Time Use and Public Policy Over the Life Cycle," CEPR Discussion Papers 500, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  7. Richard Blundell & Martin Browning & Costas Meghir, 1993. "Consumer demand and the life-cycle allocation of household expenditures," IFS Working Papers W93/11, Institute for Fiscal Studies.
  8. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467.
  9. Kathryn Shaw, 1994. "The Persistence of Female Labor Supply: Empirical Evidence and Implications," Journal of Human Resources, University of Wisconsin Press, vol. 29(2), pages 348-378.
  10. Martin Browning & Annamaria Lusardi, 1995. "Household Saving: Micro Theories and Micro Facts," Department of Economics Working Papers 1995-02, McMaster University.
  11. Patricia Apps & Ray Rees, 2003. "Fertility, Dependency and Social Security," CEPR Discussion Papers 462, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  12. repec:fth:harver:1490 is not listed on IDEAS
  13. Denise Doiron & Glenn Jones & Elizabeth Savage, 2008. "Healthy, wealthy and insured? The role of self-assessed health in the demand for private health insurance," Health Economics, John Wiley & Sons, Ltd., vol. 17(3), pages 317-334.
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