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Generational Accounting in Portugal

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  • Jorge Pinheiro

    (University of Glasgow)

Abstract

The social and economic developments in European countries have put pressure on their national budgets and threaten the sustainability of public policies. The traditional fiscal indicators, specifically, the deficit and the debt, which are still used today as guiding tools, have proved to be insufficient, due to their arbitrary nature and short-term focus. In this paper, we resort to an alternative fiscal indicator, known as ‘generational accounting’, which is able to incorporate the future changes in the demographic structure of the population, and their corresponding impact on public accounts. It is also able to evaluate how current fiscal policy affects, not only, current generations, but also future generations. We apply this methodology to assess the long-term fiscal situation of Portugal, and compare the results with those obtained in 1999. In this context, we also explore additional scenarios, as well as additional indicators, in order to provide some robustness to our findings. Our results show that, if the current fiscal policy is not significantly changed, future generations will face a much heavier fiscal burden than current generations.

Suggested Citation

  • Jorge Pinheiro, 2021. "Generational Accounting in Portugal," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 20(2), pages 181-221, May.
    • Handle: RePEc:spr:portec:v:20:y:2021:i:2:d:10.1007_s10258-020-00180-6
    DOI: 10.1007/s10258-020-00180-6
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    References listed on IDEAS

    as
    1. Diamond, Peter, 1996. "Generational Accounts and Generational Balance: An Assessment," National Tax Journal, National Tax Association;National Tax Journal, vol. 49(4), pages 597-607, December.
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    6. Altonji, Joseph G & Hayashi, Fumio & Kotlikoff, Laurence J, 1992. "Is the Extended Family Altruistically Linked? Direct Tests Using Micro Data," American Economic Review, American Economic Association, vol. 82(5), pages 1177-1198, December.
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    8. Auerbach, Alan J & Gokhale, Jagadeesh & Kotlikoff, Laurence J, 1992. " Generational Accounting: A New Approach to Understanding the Effects of Fiscal Policy on Saving," Scandinavian Journal of Economics, Wiley Blackwell, vol. 94(2), pages 303-318.
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    More about this item

    Keywords

    Generational accounting; Fiscal sustainability; Intergenerational distribution; Overlapping generations; Net tax payments; Public accounts;
    All these keywords.

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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