Demographic Change and Public Sector Budgets in a Federal System

41 Pages Posted: 2 Jun 2008

See all articles by Michael Hofmann

Michael Hofmann

affiliation not provided to SSRN

Gerhard Kempkes

Dresden University of Technology - Faculty of Economics and Business Management

Helmut Seitz

Dresden University of Technology - Institute for Applied Public Finances and Fiscal Policy; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: May 2008

Abstract

This paper examines the effects of demographic change on public finances in a federal system. We develop a simple methodical procedure to measure the effect of demographic changes on public revenues and expenditures. We apply our method to the local, state and federal government sector as well as on the social security system in Germany. Our results suggest that demographic change will lead to significant vertical fiscal imbalances between the different layers of government. In addition we show, that subnational governments can generate a demographic dividend whereas the social security system and the federal government have to carry an additional burden due to aging.

Keywords: fiscal federalism, demographic change, sustainability of public finances

JEL Classification: H11, H68, H77, J11

Suggested Citation

Hofmann, Michael and Kempkes, Gerhard and Seitz, Helmut, Demographic Change and Public Sector Budgets in a Federal System (May 2008). CESifo Working Paper Series No. 2317, Available at SSRN: https://ssrn.com/abstract=1139792

Michael Hofmann

affiliation not provided to SSRN ( email )

Gerhard Kempkes

Dresden University of Technology - Faculty of Economics and Business Management ( email )

Mommsenstrasse 13
Dresden, D-01062
Germany

Helmut Seitz (Contact Author)

Dresden University of Technology - Institute for Applied Public Finances and Fiscal Policy ( email )

Helmholtzstrasse 10
D-01062 Dresden
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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