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The political economy of a changing population
Beetsma,R.M.W.J.
Beetsma,R.M.W.J.
Abstract
In the context of an overlapping generations model with intragenerational inequality and majority voting, I study how the taxation of the old and retired generation is affected when the population growth rate changes. A fall in the birth rate leads to two opposite effects. On the one hand, the old generation acquires more political power because their relative size in the voting population increases. This exerts downward pressure on the taxation of the old. On the other hand, the tax burden on the young (used to repay the public debt held by the old) increases, so that their support for a low tax rate on assets held by the old decreases. In general, the number of equilibria is either zero or two, one of which involves zero taxation while the other involves partial taxation of the assets held by the old.
Description
Pagination: 8
Date
1995
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Volume Title
Publisher
Unknown Publisher
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11.pdf
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Keywords
Macroeconomic Models, Taxation, Population Dynamics, Voting, Ageing, macroeconomics
Citation
Beetsma, R M W J 1995 'The political economy of a changing population' CentER Discussion Paper, vol. 1995-11, Unknown Publisher.
License
info:eu-repo/semantics/restrictedAccess