Characterizing the Expenditure Uncertainties of Industrial Countries in the 21st Century
35 Pages Posted: 3 Mar 2006
Date Written: May 2005
A number of uncertainties about long-term expenditure commitments in industrial countries are examined: (i) the assumptions underlying the projections, (ii) the potential to further reduce non-age-related expenditures, (iii) the implicitly assumed absence of shocks, and (iv) the potential for raising revenue. This paper concludes that (i) there is scope, but within narrow limits, to reduce non-age-related expenditures; (ii) fiscal policy frameworks tend to understate risks; and (iii) prevailing tax rates leave little room for increasing taxation in the countries facing the strongest aging pressures. In sum, governments will have to adopt a much more ambitious fiscal policy stance to cope with aging populations.
Keywords: Public expenditures, fiscal sustainability, fiscal frameworks, aging
JEL Classification: H5, H6
Suggested Citation: Suggested Citation