Population Age Structure and the Budget Deficit

39 Pages Posted: 20 Apr 2016

Date Written: October 19, 2004

Abstract

Chen focuses on the effects of age structure changes on the size of budget deficits of national governments. More specifically, he determines whether differences in age structure can account for the observed differences in budget deficits across countries as well as across time. By way of an extension of the untested theory of negative bequest motives advocated by Cukierman and Meltzer (1989), the author argues that the commonly accepted notion that population aging tends to increase the budget deficits of economies is theoretically consistent. However, preliminary results from country and time fixed-effects panel regressions, estimated from 1975 to 1992 over 55 industrial and developing countries, indicate statistical evidence for this postulation is present only in the developing countries but not in the industrial countries.

This paper - a product of the Knowledge for Development Program, World Bank Institute - is part of a larger effort in the institute to study the economic and social effects of population aging.

JEL Classification: E62, H30, J14

Suggested Citation

Chen, Derek H.C., Population Age Structure and the Budget Deficit (October 19, 2004). World Bank Policy Research Working Paper No. 3435. Available at SSRN: https://ssrn.com/abstract=625313

Derek H.C. Chen (Contact Author)

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States
202-458-1602 (Phone)
202-522-1492 (Fax)

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