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The impact of demographic uncertainty on public finances in the Netherlands

Author

Listed:
  • Alex Armstrong

    (CPB Netherlands Bureau for Economic Policy Analysis)

  • Nick Draper

    (CPB Netherlands Bureau for Economic Policy Analysis)

  • Ed Westerhout

    () (CPB Netherlands Bureau for Economic Policy Analysis)

Abstract

This paper presents stochastic simulations, i.e. simulations that combine the CGE model of the Dutch economy GAMMA with stochastic population projections, to quantify uncertainties surrounding the consequences of population ageing for Dutch public finances. The expected increase in the ratio of retirees to workers that is due to population ageing is sure to increase pressure on public finances and the Dutch economy in the coming decades. However, because of the uncertainty regarding future demographic developments, the exact extent of the problem is unknown. This paper quantifies the uncertainties by stochastic simulation.

Suggested Citation

  • Alex Armstrong & Nick Draper & Ed Westerhout, 2008. "The impact of demographic uncertainty on public finances in the Netherlands," CPB Discussion Paper 104, CPB Netherlands Bureau for Economic Policy Analysis.
  • Handle: RePEc:cpb:discus:104
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    File URL: http://www.cpb.nl/sites/default/files/publicaties/download/impact-demographic-uncertainty-public-finances-netherlands.pdf
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    References listed on IDEAS

    as
    1. Andrew B. Abel & N. Gregory Mankiw & Lawrence H. Summers & Richard J. Zeckhauser, 1989. "Assessing Dynamic Efficiency: Theory and Evidence," Review of Economic Studies, Oxford University Press, vol. 56(1), pages 1-19.
    2. Lee, Ronald D., 1992. "Stochastic demographic forecasting," International Journal of Forecasting, Elsevier, vol. 8(3), pages 315-327, November.
    3. Oya Celasun & Xavier Debrun & Jonathan D. Ostry, 2006. "Primary Surplus Behavior and Risks to Fiscal Sustainability in Emerging Market Countries: A "Fan-Chart" Approach," IMF Staff Papers, Palgrave Macmillan, vol. 53(3), pages 1-3.
    4. Alho, Juha M., 1990. "Stochastic methods in population forecasting," International Journal of Forecasting, Elsevier, vol. 6(4), pages 521-530, December.
    5. Nick Draper & Alex Armstrong, 2007. "GAMMA; a simulation model for ageing, pensions and public finances," CPB Document 147, CPB Netherlands Bureau for Economic Policy Analysis.
    6. repec:nsr:niesrd:279 is not listed on IDEAS
    7. Lumsdaine, Robin L. & Mitchell, Olivia S., 1999. "New developments in the economic analysis of retirement," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 49, pages 3261-3307 Elsevier.
    8. Ronald Lee & Michael Anderson, 2005. "Stochastic Infinite Horizon Forecasts for US Social Security Finances," National Institute Economic Review, National Institute of Economic and Social Research, vol. 194(1), pages 82-93, October.
    9. Casper van Ewijk & Nick Draper & Harry ter Rele & Ed Westerhout, 2006. "Ageing and the sustainability of Dutch public finances," CPB Special Publication 61, CPB Netherlands Bureau for Economic Policy Analysis.
    10. Jan Bonenkamp & Martijn van de Ven, 2006. "A small stochastic model of a pension fund with endogenous saving," CPB Memorandum 168, CPB Netherlands Bureau for Economic Policy Analysis.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Alex Armstrong & Nick Draper & André Nibbelink & Ed Westerhout, 2007. "Fiscal prefunding in response to demographic uncertainty," CPB Discussion Paper 85, CPB Netherlands Bureau for Economic Policy Analysis.
    2. Hans Fehr, 2009. "Computable Stochastic Equilibrium Models and Their Use in Pension- and Ageing Research," De Economist, Springer, vol. 157(4), pages 359-416, December.

    More about this item

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • H68 - Public Economics - - National Budget, Deficit, and Debt - - - Forecasts of Budgets, Deficits, and Debt
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts

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