Population Aging, the Composition of Government Spending,and Endogenous Economic Growth in Politico-Economic Equilibrium
AbstractThis paper introduces a democratic voting process into an OLG economy in order to analyze the e ffects of a rising old-age dependency ratio on the composition of government spending and endogenous economic growth. Forward-looking agents vote each period on the public policy mix between productive government expenditure and public consumption spending that benefi ts the elderly. Population aging shifts political power from the young to the old. While this does not aff ect public productive expenditure, it leads to an increase in public spending on the elderly and a slowdown in economic growth. However, the overall e ffect on long-term economic growth is positive. This is due to reduced capital dilution or increased saving.
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Bibliographic InfoPaper provided by University of Heidelberg, Department of Economics in its series Working Papers with number 0510.
Date of creation: 17 Feb 2011
Date of revision:
Note: This paper is part of http://archiv.ub.uni-heidelberg.de/volltextserver/view/schriftenreihen/sr-3.html
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Demographics; Endogenous Economic Growth; Government Spending; Markov Perfect Equilibrium; Probabilistic Voting;
Find related papers by JEL classification:
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
This paper has been announced in the following NEP Reports:
- NEP-AGE-2011-02-26 (Economics of Ageing)
- NEP-ALL-2011-02-26 (All new papers)
- NEP-CDM-2011-02-26 (Collective Decision-Making)
- NEP-DGE-2011-02-26 (Dynamic General Equilibrium)
- NEP-FDG-2011-02-26 (Financial Development & Growth)
- NEP-PBE-2011-02-26 (Public Economics)
- NEP-POL-2011-02-26 (Positive Political Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Martin Gonzalez-Eiras & Dirk Niepelt, 2007.
"The Future of Social Security,"
07.02, Swiss National Bank, Study Center Gerzensee.
- Gonzalez-Eiras, Martin & Niepelt, Dirk, 2007.
"Population Ageing, Government Budgets, and Productivity Growth in Politico-Economic Equilibrium,"
CEPR Discussion Papers
6581, C.E.P.R. Discussion Papers.
- Martín Gonzales-Eiras & Dirk Niepelt, 2007. "Population Ageing, Government Budgets, and Productivity Growth in Politico-Economic Equilibrium," Working Papers 07.05, Swiss National Bank, Study Center Gerzensee.
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