Ageing municipalities, gerontocracy and fiscal competition

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. We develop a simple model of fiscal competition among ageing municipalities. When ageing advances, gerontocracies and social planners gradually substitute publicly provided goods aimed at the mobile young population for publicly provided goods for the elderly. This substitution process does not only depend on the ageing itself but also on crowding effects and on the regional distribution of the elderly population. We show that fiscal competition prevents the exploitation of the young. When the share of the elderly is sufficiently large, the utility of the young is even higher in gerontocracies than in welfare maximizing societies. Due to fiscal competition, the gerontocracies will provide even more of the publicly provided good for the young than the social planner. Terms of use: Documents in EconStor mayJEL Code: H4, H7.

Determinants of Efficiency in Child-Care Provision

“…For a given level of output, the use of inputs (expenditures on materials and number of personnel) is more excessive the larger the share of elderly is. Aging municipalities may have an incentive to have inefficiently high public spending for the young when the municipalities engage in fiscal competition over the more mobile younger population group (Montén and Thum, 2010). When this is the case, a large share of the elderly can negatively influence the efficiency of child-care provision.…”

Does aging affect preferences for welfare spending? A study of peoples' spending preferences in 22 countries, 1985–2006

“…They account for a large share of the voting population; they veto proposals to reform benefit schemes; and, they impose high-tax rates on the working population in order to finance generous benefits for the elderly (see for example Mulligan & Sala-i-Martin 2003;Sinn & Uebelmesser 2002;Monten & Thum 2010). At a particular point in time, it would not matter whether these age-related spending preferences result from different life-cycle interests, cohort effects or period-specific factors.…”

“…Fiscal competition among local authorities may also limit the spending demands of self-interested elderly. A mobile young population is likely to migrate out of if the elderly voters redistributes to itself and away from the young (Monten & Thum 2010). …”

Demographic change and bank profitability: empirical evidence from German savings banks

“…In particular, the impact on public pension schemes [e.g., Casamatta et al (2001), Demange and Laroque (1999), Fehr (2000)], on inflation Malmberg (1998, 2000)], on labour markets [e.g. Boersch-Supan (2003), Henschel et al (2008)], on publicly provided goods [e.g., Borge and Rattsø (2008), Cattaneo and Wolter (2009), Montén and Thum (2009)] and on capital markets [e.g., Abel (2001), Boersch-Supan et al (2002), Krueger and Ludwig (2007), Miles (1999), Poterba (2001Poterba ( , 2004] has been extensively studied. For instance, the entire financial market may be affected by demographic change, when the elderly try to withdraw their accumulated savings without having a sufficiently large young population that is willing to hold those assets.…”