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Can Inheritances Alleviate the Fiscal Burden of an Aging Population?

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  • Erik Lueth

    (International Monetary Fund)

Abstract

With pay as you go schemes in place, population aging will impose a heavy fiscal burden on young and future cohorts. However, these cohorts may also profit from larger inheritances as the number of heirs declines. The aim of this paper is to explore the compensating potential of private intergenerational transfers. A dynamic, computable general equilibrium model is employed allowing for a pay as you go scheme, various bequest motives, and an endogenous labor supply. The findings are twofold. First, the increase in future generations' inheritances is insufficient to make up for the demographic burden. Second, increasing the inheritance tax during the demographic transition may alleviate the fiscal burden of future generations by improving overall efficiency. Copyright 2003, International Monetary Fund

Suggested Citation

  • Erik Lueth, 2003. "Can Inheritances Alleviate the Fiscal Burden of an Aging Population?," IMF Staff Papers, Palgrave Macmillan, vol. 50(2), pages 1-2.
    • Handle: RePEc:pal:imfstp:v:50:y:2003:i:2:p:2
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    Cited by:

    1. Nikolov, Plamen & Bonci, Matthew, 2020. "Do public program benefits crowd out private transfers in developing countries? A critical review of recent evidence," World Development, Elsevier, vol. 134(C).
    2. Lin, Hsing-Chun & Lee, Huey-Lin & Chen, Po-Chi & Hsu, Sheng-Ming & Lin, Kuo-Jung & Lee, Duu-Hwa & Chang, Ching-Cheng & Hsu, Shih-Shun, 2013. "The Potential Crisis of Population Ageing and Low Fertility: GEMTEE Dynamic Computable General Equilibrium used in Population Forecasts and Analysis," Conference papers 332413, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    3. Lai, Mun Sim & Orsuwan, Meechai, 2009. "Examining the Impact of Taiwan's Cash Allowance Program on Private Households," World Development, Elsevier, vol. 37(7), pages 1250-1260, July.

    More about this item

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models

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