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Are Current Tax and Spending Regimes Sustainable in Developing Asia?

Author

Listed:
  • Lee, Sang-Hyop

    (University of Hawaii at Manoa)

  • Mason, Andrew

    (University of Hawaii at Manoa)

Abstract

Changes in population age structure matter for public finances because the beneficiaries of public programs are primarily children and the elderly. This paper projects government spending on education, health care, and social protection in developing Asia up to 2050 using the National Transfer Accounts data set, United Nations’ population projections, and other long-range projections for real gross domestic product (GDP) to estimate likely fiscal burdens as a result of demographic changes and economic growth. The share of GDP devoted to public spending on health care and social protection will increase as demographic change and economic growth are mutually reinforcing. On the contrary, the share devoted to public spending on education will decline in Asia and the Pacific as a decline in fertility and the share of the school-age population dominates the increase in per capita benefits. The magnitude and the pattern by program, however, vary substantially as demographic change, growth, and the current level of public spending are quite different across economies. Social spending in the Republic of Korea; the People’s Republic of China; and Taipei,China is projected to more than double as a share of GDP by 2050, while it will be more modest in other areas of Asia and the Pacific.

Suggested Citation

  • Lee, Sang-Hyop & Mason, Andrew, 2014. "Are Current Tax and Spending Regimes Sustainable in Developing Asia?," ADB Economics Working Paper Series 414, Asian Development Bank.
    • Handle: RePEc:ris:adbewp:0414
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    Cited by:

    1. Sang-Hyop Lee & Jungsuk Kim & Donghyun Park, 2017. "Demographic Change and Fiscal Sustainability in Asia," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 134(1), pages 287-322, October.
    2. Joshua Aizenman & Yothin Jinjarak & Jungsuk Kim & Donghyun Park, 2015. "Tax Revenue Trends in Asia and Latin America: A Comparative Analysis," NBER Working Papers 21755, National Bureau of Economic Research, Inc.
    3. M. R. Narayana, 2018. "Accounting for Growth Effects of Age Structure Transition through Public Education Expenditure: New Macroeconomic Evidence from India," South Asian Journal of Macroeconomics and Public Finance, , vol. 7(2), pages 174-211, December.

    More about this item

    Keywords

    fiscal projection; population aging; social welfare expenditure;
    All these keywords.

    JEL classification:

    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • H68 - Public Economics - - National Budget, Deficit, and Debt - - - Forecasts of Budgets, Deficits, and Debt
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts

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