CEPS © 2020

The European Green Deal after Corona Implications for EU climate policy
Project Report

Demographic Uncertainty and Fiscal Policy

by Alex Armstrong / Nick Draper / Andre Nibbelink / Ed Westerhout
21 August 2006

Demographic Uncertainty and Fiscal Policy

Alex Armstrong / Nick Draper / Andre Nibbelink / Ed Westerhout

Download Publication

1892 Downloads

European Network of Economic Policy Research Institutes (ENEPRI) Research Report No. 20 / 35 pages

It is well known by now that population ageing threatens the sustainability of fiscal policies in many countries. Although a number of policy options are available to address the problem, the uncertainty surrounding the future development of the population complicates matters.
This paper analyses the economic, intergenerational and welfare effects of several alternative taxation policies that can be used to close the fiscal sustainability gap: immediate tax smoothing, delayed tax smoothing and balanced budget policies. A distinction is made between a consumption tax and a labour income tax. In addition, the influence of demographic uncertainty on the results of these policies is analysed from a number of perspectives. Simulated population shocks show the effect of demographic volatility on macroeconomic and fiscal variables. Stochastic simulations are presented to produce probabilistic bounds for the future development of the economic outcomes and to analyse the issue of optimal fiscal policy under uncertainty.


About the Authors


  • Author
    Alex Armstrong
    Alex Armstrong
  • Author
    Nick Draper
    Nick Draper
  • Author
    Andre Nibbelink
    Andre Nibbelink
  • Author
    Ed Westerhout
    Ed Westerhout
Demographic Uncertainty and Fiscal Policy
Download Publication

1892 Downloads