Fiscal Implication of Ageing: Projections of Age-related Spending

Demographic Change, Welfare, and Intergenerational Transfers: A Global Overview

“…In what follows, I will draw extensively on a set of fiscal projections by the EU and OECD (Dang et al, 2001). Their demographic component is based on Eurostat and national projections.…”

“…According to Dang et al (2001) the average increase in life expectancy projected for 21 OECD countries, and used in the fiscal projections reported below, is 4.5 years. Official government agencies have a history of underpredicting mortality gains at older ages, and consequently underpredicting the number of elderly (Keilman, 1997;National Research 7 Council, 2000;Lee and Miller, 2001).…”

“…The second set of OECD projections (Dang et al, 2001), issued five years later, projects changes in public pension spending as a share of GDP over the next fifty years along with similar changes in the costs of other transfer programs. The pension projections take into account "reforms legislated but not yet implemented."…”

“…Longer life would certainly increase the adverse fiscal impact of population aging. Using the sensitivity tests provided in Dang et al (2001), we can assess the implications, as shown in Table 1. The more rapid decline projected for the G7 by Tuljapurkar would imply that pension costs would be rise by 1% more as a share of GDP, and total costs by 1.4% more.…”

“…Although both Roseveare et al (1996) and Dang et al (2001) project public health care expenditures, the assumptions on which the projections of costs per individual of a given age are based are not clear, and the projected increases appear quite modest. By contrast, for the US both my own projections and official projections indicate massive increases (Lee and Miller, 2002).…”