Population Ageing, Taxation, Pensions and Health Costs

Patricia Apps (), Ray Rees and Margi Wood

No 564, CEPR Discussion Papers from Centre for Economic Policy Research, Research School of Economics, Australian National University

Abstract: This paper argues against the policy position that begins with a doomsday scenario of publicly provided health insurance and pension systems threatened with collapse under the stresses imposed by population ageing, and instead contends that the threat of crisis in these systems is policy driven. The central thesis of the paper is that a range of policies lead to the creation of an ageing crisis by inhibiting the efficient reallocation of female labour from the home to the market in response to the decline in fertility. The analysis focuses on family support policies that create large effective tax burdens on female labour supply, by means testing the support on family income, or selectively on the second income. Examples include Family Tax Benefit Part A and Part B, the Medicare Levy and the Medicare Safety Net. The analysis draws on household survey data to show that female labour supply is strongly positively associated with household saving, the purchase of private health insurance and spending on family health generally. Policies that inhibit female labour supply therefore have the effect of reducing the tax base for funding public pensions and health care, while simultaneously reducing the capacity of families to fund them privately.

Keywords: life cycle; health costs; pensions; household taxation (search for similar items in EconPapers)
JEL-codes: D19 H13 I18 J26 (search for similar items in EconPapers)
Date: 2007-11
New Economics Papers: this item is included in nep-age, nep-hea and nep-ias
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Journal Article: Population Ageing, Taxation, pensions and Health Costs (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:auu:dpaper:564

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