The fiscal burden of rising dependency ratios

Abstract

This paper explores the issue of the fiscal burden of population aging in Canada over the period from 2004 to 2026 by introducing a new methodological tool and using an approach that (a) is comprehensive with respect to government revenues and expenditures, (b) uses a fine disaggregation of government revenues and expenditures, and (c) integrates demographic, economic, and fiscal developments. The results indicate that the concerns about the ability of the existing fiscal system to withstand the pressures of population aging are unfounded. They indicate that, in the absence of an economic collapse, the existing fiscal structure will be able to handle the fiscal pressures of population aging. Instead of letting a nonexistent problem drive the course of fiscal policy in Canada, it would be more profitable to focus on avenues for making the fiscal structure a more effective tool for economic growth and human development. Copyright Springer Science+Business Media B.V. 2007Population aging, Fiscal burden, Dependency ratios, Fiscal dependency,

Does Population Aging Contribute to Increased Fiscal Spending

“…became an aged society due to a low fertility rate and prolonged life expectancy and it is one of the society's great concerns. As seen in the previous section, the level and speed of population aging in Korea are quite severe compared to other advanced economies and there are several researches on the impact of population aging in various dimensions -population aging might affect GDP growth (Prettner, 2013), it can also change labor-force participation and savings (Hu, 2015), it would also affect the asset prices (Takáts, 2012;Zeng, Zhang, Wang, & Zeng, 2019), and it might also cause a fiscal burden (Ruggeri & Zou, 2007) for the government due to a rise in age-related spending.…”

Financing young and elderly dependents: The case of Indian public policy

“…Following Ruggeri and Zou (2007) for projection of net benefit from government policies by dependent population, g 0-14 = E 0-14 -R 0-14 and g 60+ = E 60+ -R 60+ are defined as the per capita net public transfer gain of young and elderly dependents in the age groups 0-14 years and 60 years and older, from the excess public expenditure E over the public revenue R collected from the two respective age groups, then total net gain of the dependent population in the year t is:…”

“…The ratio of the net gain by young dependents in the 0-14 year age group to the net gain of elderly dependents 60 years and older, from public transfers inflow and outflow, r = over time at constant 2004 age patterns of net gain, can serve as an indication of the need, in the face of declining fertility, to shift public policy for the welfare of elderly dependents. The ageing factor A = incorporates the difference in per capita public transfers gain by the young and elderly dependents and relative changes in the population of these two groups (Ruggeri and Zou, 2007), and can be treated as a measure of the dependency ratio adjusted for the difference in public transfer gains. The fiscal burden ratio is the fiscal burden per dependent person in a fiscal year, considering constant net gain from public transfers in 2004/05.…”

The effect of population aging on pension enforcement: Do firms bear the burden?

“…This pension scheme is mandatory with defined contribution and benefit assignments. For convenience, pension insurance is referred to as the urban basic pension insurance if we do not specifically point out other different China's pension insurances in this paper.4 The contribution rates may vary slightly across regions(Wu, 2013).5 In China, local governments can use budget revenue to make up the deficit of their pension account, but pension revenue is earmarked and not be used for other types of expenditure.6 Some previous studies only have investigated the impact of population aging on the fiscal burden of governments(Lee, 2019;Ruggeri & Zou, 2007). Other papers have mainly focused on the tax enforcement of governments(Chen, 2017;Zhao & Zhang, 2020).7 All variables are defined in Table1.8 For convenience, local government is referred to as the city government at the prefectural level if we do not specifically point out other different local governments in this paper.9 The statutory retirement ages in China are 66 years for males, 55 years for female civil servants, and 50 years for female workers.10 Based on the new system, benefit formulas for three types of workers have been defined.…”

“…6 6 Some previous studies only have investigated the impact of population aging on the fiscal burden of governments (Lee, 2019; Ruggeri & Zou, 2007). Other papers have mainly focused on the tax enforcement of governments (Chen, 2017; Zhao & Zhang, 2020).…”