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The Long-run Sustainability of Fiscal Policy in Mexico: A Generational Accounting Approach

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  • Carlos Sales Sarrapy

    (Protego Investment Associates. México, D.F. Mexico)

  • Luis Videgaray Caso

    (Instituto Tecnológico Autónomo de México (ITAM). México, D.F. Mexico)

Abstract

This paper applies for the first time the generational accounting methodology to appraise the sustainability of current fiscal policies in Mexico. Generational accounting measures the consequences for future generations of current fiscal policies. Our main finding is that there is no evidence of a fiscal sustainability problem of the sort found for other countries in similar studies. The result is mainly due to favorable demographic dynamics over the coming decades and is robust to several alternative data assumptions. We conclude there is no evident need to raise overall taxes and that tax reform should focus on efficiency issues.

Suggested Citation

  • Carlos Sales Sarrapy & Luis Videgaray Caso, 1999. "The Long-run Sustainability of Fiscal Policy in Mexico: A Generational Accounting Approach," Economía Mexicana NUEVA ÉPOCA, CIDE, División de Economía, vol. 0(2), pages 367-403, July-Dece.
    • Handle: RePEc:emc:ecomex:v:8:y:1999:i:2:p:367-403
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    File URL: http://www.economiamexicana.cide.edu/num_anteriores/VIII-2/05_CARLOS_SALES_367-403.pdf
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    References listed on IDEAS

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    1. Milton Friedman, 1957. "Introduction to "A Theory of the Consumption Function"," NBER Chapters, in: A Theory of the Consumption Function, pages 1-6, National Bureau of Economic Research, Inc.
    2. Orazio P. Attanasio & Miguel Székely, 1998. "Household Savings and Income Distribution in Mexico," Research Department Publications 4152, Inter-American Development Bank, Research Department.
    3. Auerbach, Alan J. & Kotlikoff, Laurence J. & Leibfritz, Willi (ed.), 1999. "Generational Accounting around the World," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226032139.
    4. Laurence J. Kotlikoff, 1995. "Applying Generational Accounting to Developing Countries," Boston University - Institute for Economic Development 67, Boston University, Institute for Economic Development.
    5. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1.
    6. Orazio P. Attanasio & Miguel Székely, 1998. "Household Savings and Income Distribution in Mexico," Research Department Publications 4152, Inter-American Development Bank, Research Department.
    7. Alan J. Auerbach & Laurence J. Kotlikoff & Willi Leibfritz, 1999. "Generational Accounting around the World," NBER Books, National Bureau of Economic Research, Inc, number auer99-1.
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