Age and Support for Public Debt Reduction

Abstract

Many scholars and policymakers see the continuing rise of debt burdens in the advanced industrialized world as the product of aging populations and increasing dependency ratios. In fact, many prominent theoretical models of government debt accumulation -- often used to justify fiscal rules and austerity measures -- make explicit assumptions that individuals will have different preferences for debt reduction as they age. While such models have been influential, the fundamental assumption regarding the relationship between age and preferences for growing debt has not been test empirically. Using a decade's worth of data from the Eurobarometer survey across 33 countries, we find that age has a modest, non-linear impact on concern for national debt burdens. In general, the middle-aged show the most concern for debt reduction, while the young and the old are less likely to view reducing government debt as a policy priority. Notably, the relationship is strongest in countries with more generous old-age benefits.

Bottom-Up Sovereign Debt Preferences

“…We also control for age and its squared terms given the findings of non-linear relationship by Aspide et al (2021) and that age shapes private credit market incentives. Lastly, we control for regional and gender differences.…”