Practical Use of Generational Accounting

Abstract

The paper by Carl Gjersem on generational accounting in Norway is particularly interesting for two reasons. First, Norway is the only European country in which generational accounts are regularly presented in official documents to guide policymaking. Each year the National Budget includes a section on generational accounting highlighting the change in general government consumption required to restore balance between generations. Second, the budgetary situation of Norway is much more favourable than that of other developed countries. After examining the state and prospects of Norwegian public finances, the paper gives an account of the development of generational accounting in Norway. It points to two specific features: the need to evaluate alternative policies for exploiting non-renewable resources (petroleum revenues) and the need to consider the possibility that estimates based on a single year may provide misleading indications in a country with strong business cycles. Intertemporal distribution is at the core of the first aspect. This makes generational accounting particularly well suited for the analysis of alternative policies. Cyclical effects are taken into account via an adjustment of the estimate of the change in public consumption. Gjersem relates the role of generational accounting in official documents to the tradition of long-term planning and analysis and the use of numerical models.