Measures of Fiscal Dependency
There is a concern in many countries that projected increases in the population age sixty-five and older will impose unsustainable burdens on future generations. These fiscal pressures are often expressed with reference to population dependency ratios. The authors argue that concerns about fiscal sustainability may be legitimate, but the use of population dependency ratios as indicators of fiscal pressures is not. They develop an approach to this issue that includes (1) a comprehensive coverage of the public sector, (2) a new methodology for capturing the fiscal effects of population aging, and (3) the integration of demographic, economic, and fiscal variables. This approach is applied to the Canadian fiscal system for the period from 2002-2003 to 2025- 2026. The results indicate that the current fiscal system is sustainable over the long run and does not incorporate intergenerational inequities.
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