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Modelling the Effect of Population Ageing on Government Social Expenditures

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  • John Bryant

    ()
    (The Treasury)

Abstract

This paper reviews and extends a new framework, developed by Razin, Sadka, and Swagel, for capturing the effect of population ageing on public support for government social expenditures. Razin et al construct up an overlapping generations, median voter model, and investigate the empirical applicability of the model using panel data from 13 OECD countries. Their results suggest that population ageing will put downward pressure on per capita expenditures. These results rest, however, on an assumption that there is only one dependant age group: the old. This paper investigates the consequences of allowing for two such age groups: the young and the old. A replication of Razin et al’s empirical analysis, using two dependent age groups rather than one, suggests that population ageing will instead put upward pressure on per capita expenditures. Although these results are tentative, they illustrate the usefulness of including both youth dependency and old-age dependency in Razin et al’s framework.

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File URL: http://www.treasury.govt.nz/publications/research-policy/wp/2003/03-15/twp03-15.pdf
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Bibliographic Info

Paper provided by New Zealand Treasury in its series Treasury Working Paper Series with number 03/15.

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Length: 13 pages
Date of creation: Mar 2003
Date of revision:
Handle: RePEc:nzt:nztwps:03/15

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Related research

Keywords: Social expenditures; Median voter models; Population Ageing;

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References

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  1. Razin, Assaf & Sadka, Efraim & Swagel, Phill, 2001. "The Aging Population and the Size of the Welfare State," CEPR Discussion Papers 2930, C.E.P.R. Discussion Papers.
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Citations

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Cited by:
  1. Simonovits, Andras, 2007. "Can population ageing imply a smaller welfare state?," European Journal of Political Economy, Elsevier, vol. 23(2), pages 534-541, June.
  2. Shimasawa, Manabu & Oguro, Kazumasa & Toyoda, Nao, 2014. "Does Japan have a Gray Democracy? An empirical analysis of prefectural data," CIS Discussion paper series 615, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
  3. John Bryant, 2003. "Demographic Change and New Zealand’s Economic Growth," Treasury Working Paper Series 03/04, New Zealand Treasury.
  4. Disney, Richard & Galasso, Vincenzo & Profeta, Paola, 2007. "A further comment on ageing and the welfare state," European Journal of Political Economy, Elsevier, vol. 23(2), pages 576-577, June.
  5. Disney, Richard, 2007. "Population ageing and the size of the welfare state: Is there a puzzle to explain?," European Journal of Political Economy, Elsevier, vol. 23(2), pages 542-553, June.
  6. Sanz, Ismael & Velazquez, Francisco J., 2007. "The role of ageing in the growth of government and social welfare spending in the OECD," European Journal of Political Economy, Elsevier, vol. 23(4), pages 917-931, December.

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