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Funding the future: The impact of population ageing on revenues across levels of government

Author

Listed:
  • Sean Dougherty
  • Pietrangelo de Biase
  • Luca Lorenzoni

Abstract

Government revenues may be affected by economic growth and changes in demographics over time. The effect of economic growth can be captured by long-run buoyancy – responsiveness of government revenues to GDP growth – while the demographic effect can be captured by changes in labour income, asset income and consumption patterns over the life cycle, as well as population growth. This paper attempts to quantify the effect of population ageing on OECD tax revenues across different levels of government, by estimating error correction models of revenue buoyancies over the 1990 to 2018 period, by type of revenue, country and level of government. Multiple scenarios are used for the projections to 2040, which are combined with scenarios for the evolution of revenue bases using newly harmonized EU and UN National Transfer Accounts data as well as OECD Population Projections.

Suggested Citation

  • Sean Dougherty & Pietrangelo de Biase & Luca Lorenzoni, 2022. "Funding the future: The impact of population ageing on revenues across levels of government," OECD Working Papers on Fiscal Federalism 39, OECD Publishing.
    • Handle: RePEc:oec:ctpaab:39-en
    DOI: 10.1787/2b0f063e-en
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    More about this item

    Keywords

    demographics; fiscal federalism; intergovernmental relations; revenue buoyancy; tax policy;
    All these keywords.

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts

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