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Future changes in age and household patterns: Some implications for public finances

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  • Jacobsen, Rasmus Højbjerg
  • Jensen, Svend E. Hougaard

Abstract

Using stochastic forecasting techniques, this paper assesses the consequences for public finances of changes in age and household structures in Denmark over the period 2008–2037. Focusing on components of welfare provisions and tax payments with noticeable differences across age and household status, we show that, based on a point forecast, the fiscal impact of changes in household structures amounts to an annual negative effect of 0.5% of GDP, and the effect of changes in age structures is forecast to worsen the public budget by 3.7% of GDP per year. While being subject to a considerable amount of uncertainty, the prospect of such a dramatic weakening of public finances is likely to trigger demands for welfare reforms characterized by a more individualized system of public transfer and tax payments, in addition to the measures that have already been taken to address the fiscal effects of population ageing.

Suggested Citation

  • Jacobsen, Rasmus Højbjerg & Jensen, Svend E. Hougaard, 2014. "Future changes in age and household patterns: Some implications for public finances," International Journal of Forecasting, Elsevier, vol. 30(4), pages 1110-1119.
    • Handle: RePEc:eee:intfor:v:30:y:2014:i:4:p:1110-1119
    DOI: 10.1016/j.ijforecast.2014.05.004
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    1. Christine de la Maisonneuve & Joaquim Oliveira Martins, 2013. "Public Spending on Health and Long-term Care: A new set of projections," OECD Economic Policy Papers 6, OECD Publishing.
    2. Davig, Troy & Leeper, Eric M. & Walker, Todd B., 2010. ""Unfunded liabilities" and uncertain fiscal financing," Journal of Monetary Economics, Elsevier, vol. 57(5), pages 600-619, July.
    3. Juha Alho & Nico Keilman, 2010. "On future household structure," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 173(1), pages 117-143, January.
    4. International Monetary Fund, 2009. "Fiscal Implications of the Global Economic and Financial Crisis," IMF Staff Position Notes 2009/13, International Monetary Fund.
    5. Claudio Quintano & Antonella D'Agostino, 2006. "Studying Inequality In Income Distribution Of Single‐Person Households In Four Developed Countries," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 52(4), pages 525-546, December.
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    Cited by:

    1. Rasmus Højbjerg Jacobsen & Svend E. Hougaard Jensen, 2014. "Changing Age and Household Patterns: Implications for Welfare Costs in Denmark 1982 – 2007," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 39, pages 1-4.
    2. Nico Keilman, 2017. "A combined Brass-random walk approach to probabilistic household forecasting: Denmark, Finland, and the Netherlands, 2011–2041," Journal of Population Research, Springer, vol. 34(1), pages 17-43, March.

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