Economics at your fingertips  

The impact of population aging on public finance in the European Union

Mateo Zokalj
Additional contact information
Mateo Zokalj: University of Zagreb, Faculty of Economics and Business, Zagreb, Croatia

Financial Theory and Practice, 2016, vol. 40, issue 4, 383-412

Abstract: Population aging is a process that shapes the economic environment in most of the developed economies. Thus, understanding the dynamics between public finance and the demographic variables enables policy-makers to adapt and to ameliorate their medium-term budgetary frameworks. The aim of this paper is to examine the fiscal implications of the demographic shift using panel data on 25 EU countries in the period from 1995 until 2014. In order to qualify the findings of previous literature, this paper considers the demographic variables as endogenous and applies the system GMM estimator to obtain the elasticity of several public finance categories with respect to population aging. The results indicate significant and positive impacts of the elderly share on expenditure for pensions and social protection. The higher positive impact on overall public expenditure compared with total government revenue confirms the negative effect of population aging on budget balance. An increase in the young population has a significant impact only on health expenditure.

Keywords: population aging; demographic transition; public finance; system GMM (search for similar items in EconPapers)
JEL-codes: E62 H5 H6 J14 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link) (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

More articles in Financial Theory and Practice from Institute of Public Finance Contact information at EDIRC.
Bibliographic data for series maintained by Martina Fabris ().

Page updated 2023-05-18
Handle: RePEc:ipf:finteo:v:40:y:2016:i:4:p:383-412