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Demographic Change and Public Sector Budgets in a Federal System

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  • Michael Hofmann
  • Gerhard Kempkes
  • Helmut Seitz

Abstract

This paper examines the effects of demographic change on public finances in a federal system. We develop a simple methodical procedure to measure the effect of demographic changes on public revenues and expenditures. We apply our method to the local, state and federal government sector as well as on the social security system in Germany. Our results suggest that demographic change will lead to significant vertical fiscal imbalances between the different layers of government. In addition we show, that subnational governments can generate a demographic dividend whereas the social security system and the federal government have to carry an additional burden due to ageing.

Suggested Citation

  • Michael Hofmann & Gerhard Kempkes & Helmut Seitz, 2008. "Demographic Change and Public Sector Budgets in a Federal System," CESifo Working Paper Series 2317, CESifo.
    • Handle: RePEc:ces:ceswps:_2317
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    Cited by:

    1. Eckhard Wurzel, 2009. "Financial policy: a stronger result-orientation needed," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 62(18), pages 38-42, September.
    2. de la Croix, David & Pierrard, Olivier & Sneessens, Henri R., 2013. "Aging and pensions in general equilibrium: Labor market imperfections matter," Journal of Economic Dynamics and Control, Elsevier, vol. 37(1), pages 104-124.
    3. Fanny Annemarie Kluge, 2013. "The Fiscal Impact of Population Aging in Germany," Public Finance Review, , vol. 41(1), pages 37-63, January.

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    More about this item

    Keywords

    fiscal federalism; demographic change; sustainability of public finances;
    All these keywords.

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H68 - Public Economics - - National Budget, Deficit, and Debt - - - Forecasts of Budgets, Deficits, and Debt
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts

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