Aging, Human Capital, and Productivity in France: A Generational Accounting Perspective

Abstract

The aim of this paper is to highlight the potential productivity gains resulting from improvements in the (i) educational attainment and (ii) health status of the working-age population. For that purpose, we develop a Generational Accounting Model applied to the French economy. Using the conventional methodology of generational accounting, we first estimate the adjustments that will be necessary to ensure the sustainability of French fiscal policy in the long term under the assumption that individual taxes and transfers grow at the same rate as labor productivity. However, this assumption does not account for the explicit determinants of individual productivity. Therefore, we then explain how productivity growth is partly due to the French populations skill level and its health level, which is approximated by the survival rate of adults. We estimate that the increased educational attainment and improved adult survival rate in France generate potentially important productivity gains that could significantly challenge the weight of the burden induced by aging. Therefore, we estimate that this change could reduce the tax burden bequeathed to future generations by 79 percent. Our results are robust to the main assumptions. JEL Codes: E62, H51, I10According to equation (1), the French Government Budget is balanced in the long term when the present value of government purchases, PVG t , less public net wealth, W t , equals the sum of the present value of net tax payments by living generations over the rest of their lives, PVL t , and the present value of net tax payments by future generations over the rest of their lives, PVF t . W t constitutes the only directly 4 875

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“…There are several components that can be relied upon to apply the concept of generational accounting in government units, and the following is a presentation of those components (Bonin, 2001;Chojnicki & Rabesandratana, 2018):…”

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