 Fiscal sustainability and demographics – Should we save or work more?Torben M. Andersen Journal of Macroeconomics, 2012, vol. 34, issue 2, 264-280 Abstract: Approaching demographic shifts are raising concerns about fiscal sustainability in most OECD countries. A widespread view based on the tax-smoothing idea is that a prior consolidation of public finances is required to cope with the predicted trend deterioration in the primary budget balance. However, the smoothing argument cannot unconditionally be applied to the demographic problem. It is important to distinguish between increases in the dependency ratio driven by changes in fertility and longevity. For the former the smoothing argument may be appropriate, but not for the latter. In the case of longevity, a trade-off between consolidation and increasing retirement ages becomes relevant, and there are strong arguments why the latter should be pursued by e.g. linking statutory retirement ages to longevity. Both positive aspects in assessing the order of magnitude of sustainability problems and normative aspects of formulating policy strategies are addressed. Keywords: Tax smoothing; Fiscal sustainability; Longevity; Fertility (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:34:y:2012:i:2:p:264-280 DOI: 10.1016/j.jmacro.2012.01.001 Access Statistics for this article Journal of Macroeconomics is currently edited by Douglas McMillin and Theodore Palivos More articles in Journal of Macroeconomics from Elsevier |
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