Generational Accounting as a Tool to Assess Fiscal Sustainability: An Overview of the Methodology
The paper surveys the methodology of generational accounting, a tool for gauging intertemporal imbalance in government finances facing demographic transition. Starting from the fiscal balance rule providing the theoretical background, we review the methods of generational accountants for generating empirical projections of the items building up to the intertemporal government budget. We debate indication of generational redistribution by lifetime expected net tax payments and several indicators for fiscal sustainability found in the literature. Finally, the performance of generational accounts, which ignore behavioral and policy dynamics, is compared with that of generational welfare indicators based on overlapping generations general equilibrium models.
|Date of creation:||Jan 2004|
|Date of revision:|
|Publication status:||published in: E. Berenguer (ed.), Generational Accounting in Spain, Madrid: IFS, 2005, 27-66|
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- Alan J. Auerbach & Jagadeesh Gokhale & Laurence J. Kotlikoff, 1994. "Generational Accounting: A Meaningful Way to Evaluate Fiscal Policy," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 73-94, Winter.
- Kotlikoff, Laurence J, 1988.
"Intergenerational Transfers and Savings,"
Journal of Economic Perspectives,
American Economic Association, vol. 2(2), pages 41-58, Spring.
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