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Anticipating the Regional Effects of an Ageing Population: A Dynamic CGE Analysis for Finland

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  • Honkatukia, Juha
  • Kinnunen, Jouko
  • Marttila, Kimmo

Abstract

Coping with the effects of an ageing population is among the foremost fiscal challenges in most industrialised countries. Among the European economies, Finland provides an interesting case, as the large post-war baby-boomer generations are some years older than in other European counties, and the country is thus already coping with the effects of ageing. We evaluate the regional effects of ageing using the VERM model, a dynamic, regional CGE model for Finnish Economy. The model bases on the well-known TERM model, but has been extended in several aspects. Our dynamic extension uses MONASH-type dynamics. To study the effects of ageing, we introduce an econometric approach whereby we use econometric results for the parameter values determining the population-driven demand for public services, taking into account changes in the number and in the structure of population. Secondly, we combine CGE analysis to study fiscal pressure on public sector finances. The public sector is divided in tree sub-sectors, namely, the central government, municipalities and social security funds. The study is related to an on-going evaluation of the financial relations especially between the central government and local authorities.

Suggested Citation

  • Honkatukia, Juha & Kinnunen, Jouko & Marttila, Kimmo, 2009. "Anticipating the Regional Effects of an Ageing Population: A Dynamic CGE Analysis for Finland," Conference papers 331829, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:331829
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    References listed on IDEAS

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    1. Yvan Decreux & Hugo Valin, 2007. "MIRAGE, Updated Version of the Model for Trade Policy Analysis: Focus on Agriculture and Dynamics," Working Papers 2007-15, CEPII research center.
    2. Denise Eby Konan, 2000. "The Vertical Multinational Enterprise and International Trade," Review of International Economics, Wiley Blackwell, vol. 8(1), pages 113-125, February.
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