Fiscal prefunding in response to demographic uncertainty
Alex Armstrong (),
Nick Draper (),
André Nibbelink () and
Ed Westerhout ()
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André Nibbelink: CPB Netherlands Bureau for Economic Policy Analysis
Ed Westerhout: CPB Netherlands Bureau for Economic Policy Analysis
CPB Discussion Paper from CPB Netherlands Bureau for Economic Policy Analysis
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.
JEL-codes: H2 D50 (search for similar items in EconPapers)
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