The Aging Population and the Size of the Welfare State

Assaf Razin, Efraim Sadka and Phillip Swagel

No 8405, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Data for the United States and countries in Western Europe indicate a negative correlation between the dependency ratio and labor tax rates and the generosity of social transfers, after controlling for other factors that influence the size of the welfare state. This is despite the increased political clout of the dependent population implied by the aging of the population. This paper develops an overlapping generations model of intra-and inter-generational transfers (including old-age social security) and human capital formation which addresses this seeming puzzle. We show that with democratic voting, an increase in the dependency ratio can lead to lower taxes or less generous social transfers.

JEL-codes: H0 (search for similar items in EconPapers)
Date: 2001-07
New Economics Papers: this item is included in nep-ltv and nep-pub
Note: PE
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Citations: View citations in EconPapers (12)

Published as Razin, Assaf, Efraim Sadka and Phillip Swagel. "The Aging Population And The Size Of The Welfare State," Journal of Political Economy, 2002, v110(4,Aug), 900-918.

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Journal Article: The Aging Population and the Size of the Welfare State (2002)
Working Paper: The Aging of the Population and the Size of the Welfare State (2002)
Working Paper: The Aging Population and the Size of the Welfare State (2001)
Working Paper: The Aging Population and the Size of the Welfare State (2000)
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