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Sustainability of Public Finances

Author

Listed:
  • Lassila, Jukka
  • Valkonen, Tarmo

Abstract

This study analyses financial sustainability of the Finnish public sector. Current tax rates are unlikely to yield sufficient tax revenue for financing public expenditure under an ageing population. In the base alternative we assume that the European crisis does not worsen and that productivity returns to its previous growth path. The estimate of the sustainability gap is 1 per cent of GDP, for the period 2012–2060. In an alternative where the crisis becomes prolonged and productivity converges to a lower growth path, the gap estimate is 2,5 per cent. The estimate is based on the 2012 population projection by Statistics Finland, where life expectancies are slightly lower and net migration substantially larger than in the 2009 projection.

Suggested Citation

  • Lassila, Jukka & Valkonen, Tarmo, 2013. "Sustainability of Public Finances," ETLA Reports 3, The Research Institute of the Finnish Economy.
    • Handle: RePEc:rif:report:3
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    File URL: http://www.etla.fi/wp-content/uploads/ETLA-Raportit-Reports-3.pdf
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    More about this item

    Keywords

    Public finance; Pensions; Health and long-term care; Sustainability gap;
    All these keywords.

    JEL classification:

    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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