Fiscal Federalism and Demography
AbstractThe paper examines the effects of demographic change on federal, state and local governments in Germany with a focus on the expenditure side to answer the question, whether demographic change will induce vertical fiscal expenditure imbalances. We present estimates of the impact of demographic change on public spending based on a decomposition of expenditures into almost 30 categories (functions). Our results suggest that demographic change will indeed result in significant vertical expenditure imbalances between the federal and the subnational government sector as well as within the subnational government sector. In addition, the estimates show that the structure of expenditures by function has to be adjusted considerably in order to avoid deficits as demographically induced increases in expenditures in some important functions, such as pension payments, have to be counterbalanced by exploiting potential savings that arise from demographic change in other functions. --
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Bibliographic InfoPaper provided by Dresden University of Technology, Faculty of Business and Economics, Department of Economics in its series Dresden Discussion Paper Series in Economics with number 10/05.
Date of creation: 2005
Date of revision:
fiscal federalism; demographic change; vertical fiscal expenditure imbalances;
Find related papers by JEL classification:
- H7 - Public Economics - - State and Local Government; Intergovernmental Relations
- H1 - Public Economics - - Structure and Scope of Government
- J1 - Labor and Demographic Economics - - Demographic Economics
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