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Demographic Change and Federal Systems: Some Preliminary Results for Germany

  • Seitz, Helmut
  • Freigang, Dirk
  • Kempkes, Gerhard
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    The paper examines the effects of demographic change on federal, state and local government expenditures in Germany. Public spending is decomposed into almost 30 categories (functions) and simple estimates of age cost profiles are derived. Using population forecasts and assuming timeinvariant age cost profiles we estimate the effects of the ageing of the Germany society on the level and structure of expenditures at the three layers of governments. Our results show that subnational governments - state and local governments - can expect demographic savings whereas the federal government will live to see a worsening of its fiscal stance. Thus one should expect that significant vertical expenditure imbalances will arise that - if institutional settings are left unchanged - will ask for an adjustment of revenue distribution within the federation.

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    File URL: http://econstor.eu/bitstream/10419/22724/1/ddpe200507.pdf
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    Paper provided by Dresden University of Technology, Faculty of Business and Economics, Department of Economics in its series Dresden Discussion Paper Series in Economics with number 07/05.

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    Date of creation: 2005
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    Handle: RePEc:zbw:tuddps:0705
    Contact details of provider: Postal: 01062 Dresden
    Phone: ++49 351 463 2196
    Fax: ++49 351 463 7739
    Web page: http://www.tu-dresden.de/wiwi/
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    1. Hamid Faruqee, 2002. "Population Aging and its Macroeconomic Implications; A Framework for Analysis," IMF Working Papers 02/16, International Monetary Fund.
    2. Willi Leibfritz & Deborah Roseveare & Douglas Fore & Eckhard Wurzel, 1995. "Ageing Populations, Pension Systems and Government Budgets: How Do They Affect Saving?," OECD Economics Department Working Papers 156, OECD Publishing.
    3. James M. Poterba, 1996. "Demographic Structure and the Political Economy of Public Education," NBER Working Papers 5677, National Bureau of Economic Research, Inc.
    4. Thomas Fester & Marcel Thum, 2003. "Die Pensionslasten : eine Bedrohung der zukünftigen Handlungsfähigkeit der Länder," ifo Dresden berichtet, Ifo Institute for Economic Research at the University of Munich, vol. 10(05), pages 36-45, 06.
    5. Thai-Thanh Dang & Pablo Antolín & Howard Oxley, 2001. "Fiscal Implications of Ageing: Projections of Age-Related Spending," OECD Economics Department Working Papers 305, OECD Publishing.
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