Har vi råd til velfærdsstaten?

Billede af publikationens forside
01-12-2000
DREAM Makroøkonomi Lars Haagen Pedersen Peter Trier

The sustainability of the fiscal policy program is evaluated given the major increase in the demographic ageing and the derived increase in the public expenditures.

Abstract

The sustainability of the fiscal policy program is evaluated given the major increase in the demographic ageing and the derived increase in the public expenditures. The proportion of elderly in the population is expected to increase by 55 percent until 2040. At the same time the absolute size of the labor force is expected to be reduced by 7.5 percent measured in the potential number of working hours. The introduction and the extension of the fully funded labor market pension schemes on the other hand generates an expected increase in the income tax base due to the fact that present contributions to the system is deductible in current income before taxation whereas future receipts from the pension system are taxable.

A measure of fiscal sustainability, called the sustainable tax-rate, is introduced. Using the computable general equilibrium model of Statistics Denmark, DREAM it is calculated that the sustainable tax-rate is 2.8 percentage points higher than the actual tax rate in 2003. The taxation of future receipts from the fully financed pension schemes account for 40 percent of the increase in the expenditures relative to GDP. The public net-debt will increase substan-tially from 2020 and converge to 67 percent of GDP in the long run. As most of the increase will take place in the period from 2020 to 2040, we expect that, in practice, this scenario will imply increased cost of finance for the public sector. To reduce the problem measures of reduced public spending and incentives to increase labor supply are needed.

We find that a permanent increase in the rate of fertility will not reduce the fiscal burden. In fact the sustainable tax-rate is higher in this case. The same result is true for increased immigration, where immigrants are assumed to have the same labor market behavior as the current stock of immigrants.