Fiscal Federalism and Demography
The paper examines the effects of demographic change on federal, state and local governments in Germany with a focus on the expenditure side to answer the question, whether demographic change will induce vertical fiscal expenditure imbalances. We present estimates of the impact of demographic change on public spending based on a decomposition of expenditures into almost 30 categories (functions). Our results suggest that demographic change will indeed result in significant vertical expenditure imbalances between the federal and the subnational government sector as well as within the subnational government sector. In addition, the estimates show that the structure of expenditures by function has to be adjusted considerably in order to avoid deficits as demographically induced increases in expenditures in some important functions, such as pension payments, have to be counterbalanced by exploiting potential savings that arise from demographic change in other functions.
|Date of creation:||2005|
|Date of revision:|
|Contact details of provider:|| Postal: 01062 Dresden|
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- 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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"Aging Population and Education Finance,"
CEPR Discussion Papers
3950, C.E.P.R. Discussion Papers.
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NBER Working Papers
5677, National Bureau of Economic Research, Inc.
- James M. Poterba, 1997. "Demographic structure and the political economy of public education," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 16(1), pages 48-66.
- Echevarria, Cruz A, 1995. "On Age Distribution of Population, Government Expenditure and Fiscal Federalism," Journal of Population Economics, Springer;European Society for Population Economics, vol. 8(3), pages 301-13, August.
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