Population Aging and Fiscal Policy in Europe and the United States

24 Pages Posted: 7 Apr 2001

See all articles by Bernd Raffelhüschen

Bernd Raffelhüschen

University of Freiburg; University of Bergen; CESifo (Center for Economic Studies and Ifo Institute)

Jagadeesh Gokhale

Cato Institute

Date Written: January 2000

Abstract

In this paper, we compare the total size of intertemporal public liabilities (IPLs) of several European countries and the United States. We utilize the machinery of generational accounting in order to calculate the composition of the countries IPLs, that is the sum of the explicit and implicit liabilities embedded in the respective fiscal policies. The findings suggest that present fiscal policies of all countries with the exception of Ireland have positive intertemporal liabilities and, hence, are unsustainable over the long-term. The study also confirms the claim made by advocates of generational accounting that explicit debt is a poor indicator of long-term fiscal sustainability. Among all EMU participants, those with the highest implicit liabilities report the lowest explicit debt. However, countries with the smallest or negative implicit liabilities have rather high explicit debt levels in the base year of the calculations reported here 1995.

JEL Classification: E6, H6, J1

Suggested Citation

Raffelhueschen, Bernd and Gokhale, Jagadeesh, Population Aging and Fiscal Policy in Europe and the United States (January 2000). Available at SSRN: https://ssrn.com/abstract=263970 or http://dx.doi.org/10.2139/ssrn.263970

Bernd Raffelhueschen (Contact Author)

University of Freiburg ( email )

Fahnenbergplatz
Freiburg, D-79085
Germany
49-7612032353 (Phone)
49-7612042290 (Fax)

University of Bergen

Muséplassen 1
N-5008 Bergen, +47 55 58
Norway

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.cesifo.de

Jagadeesh Gokhale

Cato Institute ( email )

1000 Massachusetts Avenue, N.W.
Washington, DC 20001-5403
United States

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