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Smoothing the Fiscal Costs of Population Ageing in Australia: Effects on Intergenerational Equity and Social Welfare

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  • ROSS GUEST

Abstract

This paper applies an overlapping generations model in order to evaluate the case for smoothing the fiscal costs associated with population ageing. The motivation is the establishment in Australia of the Future Fund which acts to smooth the tax burden over time. The conclusion is that tax smoothing of the order implied by the Future Fund yields a gain in social welfare in the order of 1.0 per cent in equivalent annual increases in GDP. All current generations of workers and retired workers are worse off, with middle‐aged workers the worst affected, but future generations are better off and by larger magnitudes.

Suggested Citation

  • Ross Guest, 2008. "Smoothing the Fiscal Costs of Population Ageing in Australia: Effects on Intergenerational Equity and Social Welfare," The Economic Record, The Economic Society of Australia, vol. 84(265), pages 177-192, June.
    • Handle: RePEc:bla:ecorec:v:84:y:2008:i:265:p:177-192
    DOI: 10.1111/j.1475-4932.2008.00461.x
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    References listed on IDEAS

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    6. Heal, G., 1998. "Valuing the Future: Economic Theory and Sustainability," Papers 98-10, Columbia - Graduate School of Business.
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    9. repec:fth:harver:1490 is not listed on IDEAS
    10. Ross Guest, 2006. "Population ageing, fiscal pressure and tax smoothing: a CGE application to Australia," Fiscal Studies, Institute for Fiscal Studies, vol. 27(2), pages 183-203, June.
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    Cited by:

    1. Sameera Awawda & Mohammad Abu-Zaineh & Bruno Ventelou, 2019. "Who Bears the Burden of Universal Health Coverage? An Assessment of Alternative Financing Policies Using an Overlapping generations General Equilibrium Model," Working Papers 1335, Economic Research Forum, revised 21 Aug 2019.
    2. Ross Guest, 2013. "Intergenerational Smoothing of New Zealand’s Future Fiscal Costs," Treasury Working Paper Series 13/12, New Zealand Treasury.
    3. Robert A Buckle & Amy A Cruickshank, 2013. "The Requirements for Long-Run Fiscal Sustainability," Treasury Working Paper Series 13/20, New Zealand Treasury.

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