Generational Accounting: Theory and Application

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Springer Science & Business Media, Aug 28, 2001 - Business & Economics - 268 pages
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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.
  

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Contents

1 The Rationale for Generational Accounting
1
11 Deficit Accounting and Generational Redistribution
2
12 Generational Redistribution and the Economy
5
122 The Fiscal Balance Rule
8
2 Net Taxes of Living Generations
13
21 Generational Accounts Defined
14
22 The Meaning of Net Taxes
16
23 The Projection of Taxes and Transfers
20
52 The Demographic and Fiscal Scenarios
98
522 Relative Tax and Government Spending Profiles
106
523 Aggregate Budget and Absolute Net Tax Payments
117
524 The Future Economic Environment
125
53 Generational Redistribution in Germany
132
532 Intertemporal Fiscal Imbalance
142
533 Sensitivity Analysis
151
6 Immigration Policy and Fiscal Sustainability
163

24 Accounting for Economic Growth
25
25 General Equilibrium Considerations
29
26 Breaking Down Generational Accounts
32
27 Ambiguities of Generational Accounts
33
3 The Intertemporal Public Budget
37
32 Determinants of Government Wealth
40
33 The NoPonzi Game Condition
44
34 The Mechanics of the Intertemporal Budget
46
4 Assessing Fiscal Imbalance
49
42 The Conventional Sustainability Index
54
43 Subgroup Accounts and Fiscal Sustainability
58
44 Sustainability and Generational Redistribution
61
45 Analytical Shortcomings of the Residual Approach
67
451 Ambiguous Policy Implications
68
452 Sensitivity to the Concept of Net Taxes
70
453 Fiscal Policy Indicators
72
46 The Sustainability Approach
77
461 The Sustainability Gap
78
462 A Set of Sustainability Indicators
81
5 The Intertemporal State of German Public Finances
93
62 Migration Scenarios and Parameter Estimates
166
63 The Fiscal Contribution of Immigrants
174
632 Immigrant Cohort Deficits
179
633 The Sustainability Impacts of Immigration Policies
181
64 Conclusion
187
7 Options for Social Security Reform
189
72 The Measurement of Generational Reform Burdens
204
73 The Generational Impacts of Pension Reform
208
731 Reforming the Payasyougo Pension System
209
732 Proposals for Partially Funded Pension Systems
220
74 Conclusion
233
8 Whither Generational Accounting?
235
Proofs
241
A2 Invariance of the Relative Fiscal Imbalance
242
A3 Normal Reaction of Future Generational Accounts
243
The Demographic Model
245
German Public Sector Budgets
251
References
254
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