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Fiscal Sustainability and Generational Burden Sharing in Denmark

  • Svend E. Hougaard Jensen
  • Ulrik Nødgaard
  • Lars Haagen Pedersen
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    Based on generational accounts and a simple welfare calculus, this paper studies two alternative scenarios of sustainable fiscal policy in Denmark. A strategy of tax smoothing is found to provide a fairly even intergenerational distribution of the financial burden associated with population ageing. While tax smoothing causes a relatively sharp increase in public debt along the transition path, a strategy of debt smoothing is shown to pass a larger part of the financial burden onto current generations but without changing the intergenerational distribution profile in any dramatic way. A comparison based on a social welfare function indicates a marginal superiority of tax smoothing.

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    Article provided by Nordic Journal of Political Economy in its journal Nordic Journal of Political Economy.

    Volume (Year): 28 (2002)
    Issue (Month): ()
    Pages: 43-60

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    Handle: RePEc:noj:journl:v:28:y:2002:p:43-60
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