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Population Ageing and Social Expenditure in New Zealand: Stochastic Projections

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Abstract

It is widely recognised that as the population ages there will be potentially significant implications for a wide range of economic variables, including in particular the fiscal costs of social expenditures. Long term fiscal planning requires estimates of the possible future path of public spending. This paper presents projections for 14 categories of social spending. These projections are based on detailed demographic estimates covering fertility, migration and mortality disaggregated by single year of age and gender. Distributional parameters are incorporated for all of the major variables, and are used to build up probabilistic projections for social expenditure as a share of GDP using simulation. Attention is focussed on health expenditures which are disaggregated into seven broad classes. In addition we explore the impacts of alternative hypothesis about future health costs. While it can be predicted with some confidence that overall social expenditures will rise, the results suggest that long term planning would be enriched by recognising the distributions about point estimates of projected social costs.

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  • John Creedy & Grant M Scobie, 2002. "Population Ageing and Social Expenditure in New Zealand: Stochastic Projections," Treasury Working Paper Series 02/28, New Zealand Treasury.
  • Handle: RePEc:nzt:nztwps:02/28
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    File URL: http://www.treasury.govt.nz/publications/research-policy/wp/2002/02-28/twp02-28.pdf
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    References listed on IDEAS

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    1. Creedy, John & Alvarado, Jose, 1998. "Social Expenditure Projections: A Stochastic Approach," Australian Economic Papers, Wiley Blackwell, vol. 37(3), pages 203-212, September.
    2. Ross S. Guest & Ian M. McDonald, 2000. "Population Ageing and Projections of Government Social Outlays in Australia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 33(1), pages 49-64.
    3. John Stephenson & Grant Scobie, 2002. "The Economics of Population Ageing," Treasury Working Paper Series 02/04, New Zealand Treasury.
    4. Erwin Diewert & Denis Lawrence, 1999. "Measuring New Zealand’s Productivity," Treasury Working Paper Series 99/05, New Zealand Treasury.
    5. Robert Buckle & Kunhong Kim & Julie Tam, 2002. "A structural var approach to estimating budget balance targets," New Zealand Economic Papers, Taylor & Francis Journals, vol. 36(2), pages 149-175.
    6. John Creedy, 2000. "The Growth Of Social Expenditure And Population Ageing," Economic Papers, The Economic Society of Australia, vol. 19(4), pages 15-32, December.
    7. Nick Davis & Richard Fabling, 2002. "Population Ageing and the Efficiency of Fiscal Policy in New Zealand," Treasury Working Paper Series 02/11, New Zealand Treasury.
    8. Polackova, Hana, 1997. "Population aging and financing of government liabilities in New Zealand," Policy Research Working Paper Series 1703, The World Bank.
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    Cited by:

    1. Lassila, Jukka & Valkonen, Tarmo & Alho, Juha M., 2014. "Demographic forecasts and fiscal policy rules," International Journal of Forecasting, Elsevier, vol. 30(4), pages 1098-1109.
    2. John Creedy & Kathleen Makale, 2014. "Social expenditure in New Zealand: Stochastic projections," New Zealand Economic Papers, Taylor & Francis Journals, vol. 48(2), pages 196-208, August.
    3. Creedy, John & Gemmell, Norman, 2013. "Can Automatic Tax Increases Pay for the Public Spending Effects of Population Ageing in New Zealand?," Working Paper Series 2820, Victoria University of Wellington, Chair in Public Finance.

    More about this item

    Keywords

    Population; projections; stochastic simulation; social expenditure; fiscal costs; New Zealand;

    JEL classification:

    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts

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