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Fiscal Federalism and Demography

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Author Info

  • Helmut Seitz

    (Dresden University of Technology, Germany)

  • Gerhard Kempkes

    (Dresden University of Technology, Germany)

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    Abstract

    This article examines the effects of demographic change on federal, state, and local government expenditures in Germany to answer the question of whether demographic change will induce vertical fiscal expenditure imbalances. The authors present estimates of the impact of demographic change on public spending based on a decomposition of expenditures into twenty-nine categories (functions). Results suggest that demographic change will result in significant vertical expenditure imbalances between the federal and the subnational government sector as well as within the subnational government sector. In addition, the estimates show that the structure of expenditures by function has to be adjusted considerably to avoid deficits since demographically induced increases in expenditures in some important functions, such as pension payments, have to be counterbalanced by exploiting potential savings that arise from demographic change in other functions.

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    File URL: http://pfr.sagepub.com/content/35/3/385.abstract
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    Bibliographic Info

    Article provided by in its journal Public Finance Review.

    Volume (Year): 35 (2007)
    Issue (Month): 3 (May)
    Pages: 385-413

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    Handle: RePEc:sae:pubfin:v:35:y:2007:i:3:p:385-413

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    Related research

    Keywords: fiscal federalism; demographic change; vertical fiscal expenditure imbalances;

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    Cited by:
    1. Sachverständigenrat zur Begutachtung der Gesamtwirtschaftlichen Entwicklung (ed.), 2011. "Herausforderungen des demografischen Wandels. Expertise im Auftrag der Bundesregierung," Occasional Reports / Expertisen, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung, number 75371.
    2. Michael Hofmann & Gerhard Kempkes & Helmut Seitz, 2008. "Demographic Change and Public Sector Budgets in a Federal System," CESifo Working Paper Series 2317, CESifo Group Munich.

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