Assessing components of uncertainty in demographic forecasts with an application to fiscal sustainability

Abstract

When the future evolution of demographic processes is described in a stochastic setting, the challenge is to communicate the meaning of forecast uncertainty in an understandable way, to decision makers and public at large. For the purpose of risk communication, a formal setting is developed in which the roles of the demographic processes on point forecasts, and more generally, on predictive distributions, can be elucidated. The communication problem becomes central in fiscal decision making, when eventual forecast errors have differential implications on the value of the policy options being considered. Tax rate that is required to maintain financial sustainability, until a given target year, is used for illustration.

Assessing Fiscal Sustainability in the Landscape of Economics Research

“…In this way, incorporating the keywords population, generational, and intergenerational. Here, we can find the studies of Alho and Lassila (2023), Dolls et al (2017), Gruen and Spender (2012), Hansen and ˙Imrohoro glu (2023), Jensen et al (2021), andPinheiro (2021). The common thread across these studies is their exploration of how demographic changes, such as aging populations, fertility rates, labor force shifts, and other demographic factors, significantly impact fiscal policies and sustainability, thereby underlining the need for informed decision making and policy interventions.…”