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Generational Distribution of Fiscal Burdens: A Positive Analysis

Uchida, Yuki and Ono, Tetsuo (2021): Generational Distribution of Fiscal Burdens: A Positive Analysis.

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Abstract

This study presents a political economy model with overlapping generations to analyze the effects of population aging on fiscal policy formation and the resulting distribution of the fiscal burden across generations. The analysis shows that both an increased life expectancy and a decreased population growth rate increase the ratios of government debt and labor income tax revenue to GDP. However, they decrease the ratio of capital income tax revenue to GDP. Furthermore, it also shows that the increased political weight of the elderly creates an increase in the ratios of public debt and labor income tax revenue to GDP, as well as an initial decrease followed by an increase in the ratio of capital income tax revenue to GDP.

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