The single most important long run fiscal issue facing the developed world is the aging of its populations. In virtually every developed country, there will be a steep increase in the ratio of the elderly to the working age population over the first half of the 21st century. The purpose of our paper is to provide an international perspective on public policies directed towards the elderly, and to discuss the implications of these policies for both the elderly and for government budgets. We begin by briefly reviewing the panoply of public programs targeted to the elderly, and document wide variation among the otherwise similar OECD nations in government spending directed towards the elderly. We then review what this increased spending is buying the elderly by providing some evidence on the relationship between social insurance program incentives and labor supply, between public spending and average elderly incomes, and between public spending and elderly poverty rates. We provide some suggestive evidence that public spending on the elderly is doing little to raise their incomes on average, perhaps due to increased early retirement, but that it is significantly protecting them against poverty. We then ask what the demographic transition bodes for the future: if countries do not change their behavior, what is the likely path for their fiscal situations? We also show that, if the past is any guide, the burden of paying these high fiscal bills is likely to be paid through reduced spending elsewhere, particularly on programs for the non-elderly.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
8103.
Length: Date of creation: Jan 2001 Date of revision: Handle: RePEc:nbr:nberwo:8103
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Find related papers by JEL classification: H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
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Axel Borsch-Supan & Reinhold Schnabel, 1999.
"Social Security and Retirement in Germany,"
NBER Chapters,
in: Social Security and Retirement around the World, pages 135-180
National Bureau of Economic Research, Inc.
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Thomas K. Bauer, & Deborah A. Cobb-Clark & Vincent Hildebrand & Mathias Sinning, 2007.
"A Comparative Analysis of the Nativity Wealth Gap,"
Ruhr Economic Papers
0006, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
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Thomas K. Bauer & Deborah A. Cobb-Clark & Vincent A. Hildebrand & Mathias Sinning, 2007.
"A Comparative Analysis of the Nativity Wealth Gap,"
CEPR Discussion Papers
554, Centre for Economic Policy Research, Research School of Social Sciences, Australian National University.
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