How to Assess Fiscal Implications of Demographic Shifts: A Granular Approach
IMF How To Notes, September 27, 2016
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- How to Assess Fiscal Implications of Demographic Shifts: A Granular Approach
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Bibliographic details
- Authors: Wei Shi
- Published: September 27, 2016
- Series: IMF How To Notes
- DOI: https://doi.org/10.5089/9781475536072.061
Overview and key findings
- Over the next few decades, the world will experience significant demographic shifts, with material fiscal implications.
- In many advanced and emerging market economies, aging populations will lead to higher spending on pensions and health care.
- Projected population dynamics will adversely affect growth and government revenues.
- The note builds on and extends a 2015 IMF Staff Discussion Note by Clements and others and presents a simple framework to quantify effects of demographic changes resulting from population aging on government fiscal balances.
- The note includes two country applications of the framework and an associated template.
Framework and methodological approach
- Presents a simple, granular framework to assist researchers in quantifying the fiscal effects of population aging on government fiscal balances.
- Emphasizes tailoring the assessment to country-specific circumstances.
- Focus areas and technical terms preserved as used in the source: age structure, age-gender cohort, age-related expenditure, age-related expenditure elasticity, coverage ratio, dependency ratio, expenditure elasticity, demographics scenario GDP, age-related expenditure elasticity, status quo.
Channels through which demographic changes affect public finances (questions the note addresses)
- What are channels through which demographic changes could affect public finances?
- How can we quantify the fiscal impact of demographic changes?
- How can we tailor the assessment to country-specific circumstances?
Applications, scenarios, and tools
- Includes two country applications demonstrating the framework.
- Provides an associated template for implementing the framework.
- Scenario-related terminology preserved: low-fertility scenario, medium-fertility scenario, replacement rate, labor force participation, labor force, coverage ratio.
Policy-relevant implications and focal areas
- Anticipate higher spending pressures on pensions and health care due to aging populations.
- Expect adverse effects on growth and government revenues driven by projected population dynamics.
- Tailor policy assessments and fiscal planning using granular, cohort-based estimates of age-related expenditure and labor force participation.
Content in this bundle
- Fiscal Policy: How to Assess Fiscal Implications of Demographic Shifts: A Granular Approach