Modelling the Effect of Population Ageing on Government Social Expenditures
AbstractThis 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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Bibliographic InfoPaper provided by New Zealand Treasury in its series Treasury Working Paper Series with number 03/15.
Length: 13 pages
Date of creation: Mar 2003
Date of revision:
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Social expenditures; Median voter models; Population Ageing;
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
- J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
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- Razin, A. & Sadka, E. & Swagel, P., 2000.
"The Aging Population and the Size of the Welfare State,"
2000-23, Tel Aviv.
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- 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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- John Bryant, 2003. "Demographic Change and New Zealand’s Economic Growth," Treasury Working Paper Series 03/04, New Zealand Treasury.
- 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.
- 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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