2007-08-27 papers

on Public Finance

Issue of 2007–08–27
one paper chosen by
Kwang Soo Cheong, Johns Hopkins University

Fiscal Prefunding in Response to Demographic Uncertainty By Alex Armstrong; Nick Draper; André Nibbelink; Ed Westerhout

Fiscal Prefunding in Response to Demographic Uncertainty

By:	Alex Armstrong; Nick Draper; André Nibbelink; Ed Westerhout
Abstract:	Uncertainty in demographic developments lowers expected future welfare levels. Increasing current tax rates and decreasing expected future tax rates may compensate part of the welfare loss that is due to demographic uncertainty. In doing so, the government effectively pursues a precautionary fiscal policy analogous to the precautionary life-cycle saving behaviour that households may exhibit in the presence of income uncertainty.
Keywords:	Fiscal policy; Demographic Uncertainty
JEL:	H2 D50
Date:	2007–07
URL:	https://d.repec.org/n?u=RePEc:cpb:discus:85

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