Taxation, Pensions, and Demographic Change

This chapter provides a review of some implications of demographic shift arising from population aging for fiscal policy, taxation policy, and social security settings. The key implications of population aging that have been forthcoming from the many national and international macroeconomic modeling studies are presented. These implications are that population aging will put significant stress on governments’ fiscal situations under current policy settings. Consideration of policy options to accommodate population aging leads to examination of age-dependent taxation, the means testing of social security benefits, general taxation and pension design, and the analysis of taxation policy over time. The chapter concludes with some comments on the nature of the literature reviewed and on possible directions for future research.