Generational Accounting in New Zealand: Is There Generational Balance?

INTERNATIONAL TAX AND PUBLIC FINANCE, Vol. 4, No. 2

Posted: 6 May 1997

See all articles by Alan J. Auerbach

Alan J. Auerbach

University of California, Berkeley - Department of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Bruce Baker

The Treasury, New Zealand

Laurence J. Kotlikoff

Boston University - Department of Economics; National Bureau of Economic Research (NBER); Gaidar Institute for Economic Policy

Jan Walliser

Congressional Budget Office

Abstract

This paper uses a recently developed technique, called "generational accounting," to assess New Zealand's long-term fiscal position. Generational accounting has become a popular alternative to traditional deficit accounting because it provides a more accurate picture of the intergenerational distribution of fiscal burdens and the associated macroeconomic effects, particularly in the presence of demographic transitions and large unfunded public transfer programs. Past studies have suggested the existence of significant generational imbalances in several countries. We find that behind New Zealand's projected budget surpluses, there is indeed a sound fiscal picture. Even under the base case scenario, which entails substantial short-run tax reductions, the burden on future generations (relative to income) is projected to fall slightly below that on current newborns. New Zealand appears to have avoided the large fiscal imbalances plaguing the United States and other OECD countries not by placing large tax burdens on young current generations, but by limiting the size of its commitments.

JEL Classification: H6

Suggested Citation

Auerbach, Alan Jeffrey and Baker, Bruce and Kotlikoff, Laurence J. and Walliser, Jan, Generational Accounting in New Zealand: Is There Generational Balance?. INTERNATIONAL TAX AND PUBLIC FINANCE, Vol. 4, No. 2. Available at SSRN: https://ssrn.com/abstract=4874

Alan Jeffrey Auerbach (Contact Author)

University of California, Berkeley - Department of Economics ( email )

549 Evans Hall #3880
Berkeley, CA 94720-3880
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510-643-0711 (Phone)
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National Bureau of Economic Research (NBER) ( email )

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CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

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Bruce Baker

The Treasury, New Zealand ( email )

PO Box 3724
Wellington, 6011
New Zealand

Laurence J. Kotlikoff

Boston University - Department of Economics ( email )

270 Bay State Road
Boston, MA 02215
United States
617-353-4002 (Phone)
617-353-4449 (Fax)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
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Gaidar Institute for Economic Policy

Gazetny per. 5-3
Moscow, 125993
Russia

Jan Walliser

Congressional Budget Office ( email )

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2nd & D Streets SW
Washington, DC 20515
United States

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