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Modelling the Effect of Population Ageing on Government Social Expenditures

  • John Bryant

    ()

    (The Treasury)

This paper reviews and extends a new framework, developed by Razin, Sadka, and Swagel, for capturing the effect of population ageing on public support for government social expenditures. Razin et al construct up an overlapping generations, median voter model, and investigate the empirical applicability of the model using panel data from 13 OECD countries. Their results suggest that population ageing will put downward pressure on per capita expenditures. These results rest, however, on an assumption that there is only one dependant age group: the old. This paper investigates the consequences of allowing for two such age groups: the young and the old. A replication of Razin et al’s empirical analysis, using two dependent age groups rather than one, suggests that population ageing will instead put upward pressure on per capita expenditures. Although these results are tentative, they illustrate the usefulness of including both youth dependency and old-age dependency in Razin et al’s framework.

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File URL: http://www.treasury.govt.nz/publications/research-policy/wp/2003/03-15/twp03-15.pdf
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Paper provided by New Zealand Treasury in its series Treasury Working Paper Series with number 03/15.

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Length: 13 pages
Date of creation: Mar 2003
Date of revision:
Handle: RePEc:nzt:nztwps:03/15
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Web page: http://www.treasury.govt.nz
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  1. Razin, Assaf & Sadka, Efraim & Swagel, Phill, 2001. "The Aging Population and the Size of the Welfare State," CEPR Discussion Papers 2930, C.E.P.R. Discussion Papers.
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