Generational Accounting

by Bonin, Holger

• ISBN13: 9783540422662
• ISBN10: 3540422668
• Format: Hardcover
• Copyright: 2001-08-01
• Publisher: Springer Verlag

Summary

Among the concepts used to assess the sustainability of fiscal policy in a changing demographic environment, generational accounting has become the most prominent. This book gives a complete and up-to-date introduction to the theory and practice of the method. It reveals deficiencies of the original residual concept and discusses various measures of intergenerational redistribution based on the recent sustainability approach to generational accounting. An application using data on German public finances serves to provide an in-depth explanation and practical illustration of the technique. The study develops new procedures to evaluate the fiscal externalities of migration and the redistribution of net wealth among living generations resulting from Social Security reform. The book is an indispensable source of reference for analysts employing generational accounting and for those wishing to study intertemporal redistribution through fiscal policy.

Table of Contents

The Rationale for Generational Accounting	1	(12)
Deficit Accounting and Generational Redistribution	2	(3)
Generational Redistribution and the Economy	5	(8)
An Overlapping Generations Model	5	(3)
The Fiscal Balance Rule	8	(5)
Net Taxes of Living Generations	13	(24)
Generational Accounts Defined	14	(2)
The Meaning of Net Taxes	16	(4)
The Projection of Taxes and Transfers	20	(5)
Accounting for Economic Growth	25	(4)
General Equilibrium Considerations	29	(3)
Breaking Down Generational Accounts	32	(1)
Ambiguities of Generational Accounts	33	(4)
The Intertemporal Public Budget	37	(12)
The Intertemporal Budget Constraint	37	(3)
Determinants of Government Wealth	40	(4)
The No-Ponzi Game Condition	44	(2)
The Mechanics of the Intertemporal Budget	46	(3)
Assessing Fiscal Imbalance	49	(44)
The Residual Approach	49	(5)
The Conventional Sustainability Index	54	(4)
Subgroup Accounts and Fiscal Sustainability	58	(3)
Sustainability and Generational Redistribution	61	(6)
Analytical Shortcomings of the Residual Approach	67	(10)
Ambiguous Policy Implications	68	(2)
Sensitivity to the Concept of Net Taxes	70	(2)
Fiscal Policy Indicators	72	(5)
The Sustainability Approach	77	(16)
The Sustainability Gap	78	(3)
A Set of Sustainability Indicators	81	(12)
The Intertemporal State of German Public Finances	93	(70)
Introduction	93	(5)
The Demographic and Fiscal Scenarios	98	(34)
Demographic Scenarios	98	(8)
Relative Tax and Government Spending Profiles	106	(11)
Aggregate Budget and Absolute Net Tax Payments	117	(8)
The Future Economic Environment	125	(7)
Generational Redistribution in Germany	132	(31)
Net Tax Burdens of Present Generations	132	(10)
Intertemporal Fiscal Imbalance	142	(9)
Sensitivity Analysis	151	(12)
Immigration Policy and Fiscal Sustainability	163	(26)
Immigration and Generational Accounting	163	(3)
Migration Scenarios and Parameter Estimates	166	(8)
The Fiscal Contribution of Immigrants	174	(13)
Generational Accounts by Resident Group	174	(5)
Immigrant Cohort Deficits	179	(2)
The Sustainability Impacts of Immigration Policies	181	(6)
Conclusion	187	(2)
Options for Social Security Reform	189	(46)
Social Security and Fiscal Sustainability in Germany	189	(15)
The Measurement of Generational Reform Burdens	204	(4)
The Generational Impacts of Pension Reform	208	(25)
Reforming the Pay-as-you-go Pension System	209	(11)
Proposals for Partially Funded Pension Systems	220	(13)
Conclusion	233	(2)
Whither Generational Accounting?	235	(6)
A. Appendix: Proofs	241	(4)
A.1 Separability of Generational Accounts	241	(1)
A.2 Invariance of the Relative Fiscal Imbalance	242	(1)
A.3 Normal Reaction of Future Generational Accounts	243	(2)
B. Appendix: The Demographic Model	245	(6)
C. Appendix: German Public Sector Budgets	251	(3)
References	254