Tax Aspects of Policy Towards Aging Populations: Canada and the United States
Alan Auerbach and
Laurence Kotlikoff
No 3405, NBER Working Papers from National Bureau of Economic Research, Inc
Abstract:
This paper uses the Auerbach-Kotlikoff Dynamic Simulation Model to compare the projected demographic transitions in Canada and the United States. The simulation model determines the perfect foresight transition path of an economy in which individuals live to age 75. The model's preferences are life cycle augmented to include utility from bequests. In addition to handling changes in demographics and fiscal policies, the model can be run for closed or open economies. In comparing Canada with the U.S., we first simulate the U.S. demographic transition, treating the U.S. as a closed economy. The time path of interest rates obtained from the U.S. simulations are then used in the Canadian simulations. In the Canada simulations, Canada is assumed to be an open economy which takes the U.S. interest rate as given. The simulations indicate that demographics are likely to have significant effects on rates of saving and taxation in both the U.S. and Canada. However, the more abrupt demographic transition in Canada combined with the projected maturation of Canadian social security system leads to a more severe predicted long term decline in Canadian saving rates. Despite the predicted lower saving rates, capital deepening is likely to occur in both countries, and the associated increase in real wages is likely to more than offset projected higher tax rates, leaving the growth-adjusted welfare of future generations higher than that of current generations.
Date: 1990-07
Note: PE
References: View complete reference list from CitEc
Citations: View citations in EconPapers (1)
Published as Canada and US Tax Comparisons, Eds. John Shoven and Joh Whalley, UCP 1992pp. 255-273
Downloads: (external link)
http://www.nber.org/papers/w3405.pdf (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: https://EconPapers.repec.org/RePEc:nbr:nberwo:3405
Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w3405
Access Statistics for this paper
More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().