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Ageing Municipalities, Gerontocracy and Fiscal Competition

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  • Anna Montén
  • Marcel Thum

Abstract

We develop a simple model of fiscal competition among ageing municipalities. When ageing advances, gerontocracies and social planners gradually substitute publicly provided goods aimed at the mobile young population for publicly provided goods for the elderly. Thissubstitution process does not only depend on the ageing itself but also on crowding effects and on the regional distribution of the elderly population. We show that fiscal competition prevents the exploitation of the young. When the share of the elderly is sufficiently large, theutility of the young is even higher in gerontocracies than in welfare maximizing societies. Due to fiscal competition, the gerontocracies will provide even more of the publicly provided good for the young than the social planner.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2008/wp-cesifo-2008-11/cesifo1_wp2469.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2469.

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Date of creation: 2008
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Handle: RePEc:ces:ceswps:_2469

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Keywords: demographic change; fiscal competition; publicly provided goods;

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  1. James M. Poterba, 2001. "Demographic Structure And Asset Returns," The Review of Economics and Statistics, MIT Press, vol. 83(4), pages 565-584, November.
  2. Cattaneo, M. Alejandra & Wolter, Stefan C., 2009. "Are the elderly a threat to educational expenditures?," European Journal of Political Economy, Elsevier, vol. 25(2), pages 225-236, June.
  3. Krueger, Dirk & Ludwig, Alexander, 2007. "On the consequences of demographic change for rates of returns to capital, and the distribution of wealth and welfare," Journal of Monetary Economics, Elsevier, vol. 54(1), pages 49-87, January.
  4. Edwards, John H. Y., 1990. "Congestion function specification and the "publicness" of local public goods," Journal of Urban Economics, Elsevier, vol. 27(1), pages 80-96, January.
  5. Axel Börsch-Supan & Alexander Ludwig & Joachim Winter, 2002. "Aging and International Capital Flows," MEA discussion paper series 02010, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
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  7. Ueli Grob & Stefan C. Wolter, 2005. "Demographic Change and Public Education Spending: A Conflict between Young and Old?," CESifo Working Paper Series 1555, CESifo Group Munich.
  8. Sinn, Hans-Werner & Uebelmesser, Silke, 2003. "Pensions and the path to gerontocracy in Germany," European Journal of Political Economy, Elsevier, vol. 19(1), pages 153-158, March.
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  14. Fehr, Hans, 1999. "Pension reform during the demographic transition," W.E.P. - Würzburg Economic Papers 8, University of Würzburg, Chair for Monetary Policy and International Economics.
  15. Borcherding, Thomas E & Deacon, Robert T, 1972. "The Demand for the Services of Non-Federal Governments," American Economic Review, American Economic Association, vol. 62(5), pages 891-901, December.
  16. James Poterba, 2004. "The Impact of Population Aging on Financial Markets," NBER Working Papers 10851, National Bureau of Economic Research, Inc.
  17. Demange, G. & Laroque, G., 1996. "Social Security and Demographic Shocks," DELTA Working Papers 96-04, DELTA (Ecole normale supérieure).
  18. James M. Poterba, 2004. "Impact of population aging on financial markets in developed countries," Economic Review, Federal Reserve Bank of Kansas City, issue Q IV, pages 43-53.
  19. Montén, Anna & Thum, Marcel, 2010. "Ageing municipalities, gerontocracy and fiscal competition," European Journal of Political Economy, Elsevier, vol. 26(2), pages 235-247, June.
  20. Alexander Haupt & Wolfgang Peters, 2003. "Voting on public pensions with hands and feet," Economics of Governance, Springer, vol. 4(1), pages 57-80, 04.
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Cited by:
  1. Michael Berlemann & Marco Oestmann & Marcel Thum, 2010. "Demographic Change and Bank Profitability. Empirical Evidence from German Savings Banks," CESifo Working Paper Series 2911, CESifo Group Munich.
  2. Schaltegger, Christoph A. & Somogyi, Frank & Sturm, Jan-Egbert, 2011. "Tax competition and income sorting: Evidence from the Zurich metropolitan area," European Journal of Political Economy, Elsevier, vol. 27(3), pages 455-470, September.
  3. Anna Montén & Marcel Thum, 2008. "Ageing Municipalities, Gerontocracy and Fiscal Competition," CESifo Working Paper Series 2469, CESifo Group Munich.
  4. Anna Montén & Christian Thater, 2010. "Determinants of efficiency in child care provision," Ifo Working Paper Series Ifo Working Paper Nr. 83, Ifo Institute for Economic Research at the University of Munich.
  5. Sørensen, Rune J., 2013. "Does aging affect preferences for welfare spending? A study of peoples' spending preferences in 22 countries, 1985–2006," European Journal of Political Economy, Elsevier, vol. 29(C), pages 259-271.
  6. Tim Krieger & Jens Ruhose, 2011. "“Honey, I shrunk the kids’ benefits!” — Revisiting intergenerational conflict in OECD countries," Working Papers CIE 46, University of Paderborn, CIE Center for International Economics.
  7. repec:pdn:wpaper:46 is not listed on IDEAS

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