IMF Working Papers

Quantifying Impact of Aging Population on Fiscal Space

By Seok G Park

June 1, 2012

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Format: Chicago

Seok G Park. "Quantifying Impact of Aging Population on Fiscal Space", IMF Working Papers 2012, 164 (2012), accessed November 7, 2025, https://doi.org/10.5089/9781475505122.001

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper quantitatively investigates how population aging trend affects fiscal space measured as unused revenue generating capacity by utilizing a standard neoclassical growth model. A calibration exercise for G-7 countries shows that France, Germany and Italy suffer greater revenue impact from a given reduction in hours worked due to their larger government expenditure. Corrective measures such as pension reform and flexible expenditure policy would be required in order to mitigate the impact of aging on fiscal space.

Subject: Expenditure, Fiscal space, Labor, Labor taxes, Revenue administration

Keywords: Laffer curve, Tax rate, WP

Publication Details

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