Ageing and Fiscal Sustainability in Europe

Fiscal Sustainability Conference, p. 255, 2000

32 Pages Posted: 17 Jul 2012

See all articles by Werner Roeger

Werner Roeger

European Commission, DGECFIN; European Commission

Date Written: January 20, 2000

Abstract

Werner Roeger analyses the economic and budgetary implications of current demographic projections for Europe and the US over the next 50 years, within the framework of a multi-country dynamic general equilibrium model. Roeger evaluates the labour supply implications of demographic changes and, drawing on previous public expenditure projections, evaluates the effects of ageing on GDP and consumption growth, on the capital to output ratio and on interest rates. The analysis indicates that the effects of population ageing on per capita income and consumption will be sizeable from 2020 onwards. The model indicates that forward looking households can cushion the decline in real consumption by increasing the rate of savings over the next 20 years. This lowers interest rates and increases the capital stock. When dependency ratios peak, households run down their capital stock. Roeger focuses on the implications of financing additional pension expenditure in a PAYG system and on the effects of distortionary taxes on unemployment rates. The simulation results show that while it will be possible to finance the additional expenditure even using distortionary taxation, the economic and budgetary costs will be large.

Suggested Citation

Roeger, Werner and Roeger, Werner, Ageing and Fiscal Sustainability in Europe (January 20, 2000). Fiscal Sustainability Conference, p. 255, 2000, Available at SSRN: https://ssrn.com/abstract=2109412 or http://dx.doi.org/10.2139/ssrn.2109412

Werner Roeger (Contact Author)

European Commission ( email )

Economic and Financial Affairs
BU1-3/159, 200 Rue de la Loi
B-1049 Brussels
Belgium

European Commission, DGECFIN ( email )

Economic and Financial Affairs
BU1-3/159, 200 Rue de la Loi
B-1049 Brussels
Belgium

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