Fiscal Prefunding in Response to Demographic Uncertainty

Alex Armstrong (), Nick Draper (), André Nibbelink () and Ed Westerhout ()

CPB Discussion Papers from CPB Netherlands Bureau for Economic Policy Analysis

Abstract: Uncertainty in demographic developments lowers expected future welfare levels. Increasing current tax rates and decreasing expected future tax rates may compensate part of the welfare loss that is due to demographic uncertainty. In doing so, the government effectively pursues a precautionary fiscal policy analogous to the precautionary life-cycle saving behaviour that households may exhibit in the presence of income uncertainty.

Keywords: Fiscal policy; Demographic Uncertainty (search for similar items in EconPapers)
JEL-codes: H2 D50 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pbe and nep-pub
Date: 2007-07
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