Welfare state winners and losers in ageing societies

Abstract

In this paper, we analyse the impact of population ageing on the sustainability andthe intergenerational fairness of public fiscal policy in three selected European coun-tries (Austria, France, and Spain). We use NTA and NTTA data, and introduce thesedata into a large-scale general equilibrium OLG model with realistic assumptionsregarding demographic trends and changes in population structure. The results forsustainability show a sharp increase in the share of public expenditure to GDP forthe main programmes of the welfare state. In the three countries analysed, publicpolicies (e.g. education, health care, and pension benefits) redistribute income fromyounger individuals to older individuals. Our findings indicate that these policiesredistribute more resources to older individuals in Spain and fewer resources to olderindividuals in Austria. We consider the effects of several reform scenarios, includingsimulations in which the statutory retirement age is raised and the tax base forfinancing health care expenditures are changed. We also describe the consequences of the population having a fixed level of educational attainment.