There is widespread acceptance that much of the developed world faces a potential pensions and welfare crisis as a result of declining birth rates and an ageing population. However, there is considerable uncertainty about the specifics of demographic forecasting and this has significant implications for public finances. Uncertain Demographics and Fiscal Sustainability addresses the economic consequences of uncertainty and, with particular reference to European economies, explores the impact of demographic risks on public finances, including pension systems, health care and old-age care expenditures. Covering a spectrum of theoretical and empirical approaches, different types of computational models are used to demonstrate not only the magnitudes of the uncertainties involved but also how these can be addressed through policy initiatives. The book is divided into four parts covering demographic, measurement, policy and methodological issues. Each part is followed by a discussion essay that draws out key elements and identifies common themes.
• Presents a range of policy options for government agencies and policy makers • Comparative approach sets European data within wider international framework • Includes contributions from leading experts on demographic forecasting
List of figures; List of tables; List of contributors; Preface; 1. Introduction Juha M. Alho, Svend E. Hougaard Jensen and Jukka Lassila; Part I. Uncertain Demographics: 2. Changing views of future demographic trends Nico Keilman, Harri Cruijsen, and Juha M. Alho; 3. Empirically-based specification of forecast uncertainty Juha M. Alho, Harri Cruijsen and Nico Keilman; Comment: the UPE forecasts: strengths, innovations, developments Shripad Tuljapurkar; Part II. Measuring Sustainability in a Stochastic Environment: 4. Fiscal implications of demographic uncertainty: comparisons across the European Union Martin Weale; 5. Demographic uncertainty and pension projections Jukka Lassila and Tarmo Valkonen; 6. Demographic uncertainty and health care expenditure Namkee Ahn; Comment: assessing the uncertainty in long-term fiscal projections Pablo Antolin; Part III. Enhancing Sustainability: 7. Evaluating pension reforms in the German context Hans Fehr and Christian Habermann; 8. Longevity adjustment of pension benefits Jukka Lassila and Tarmo Valkonen; 9. Ageing, demographic uncertainty and optimal fiscal policy Alex Armstrong, Nick Draper, André Nibbelink and Ed Westerhout; Comment: computable equilibrium models in policy analysis: future directions D. Peter Broer; Part IV. Extensions: 10. Macroeconomic consequences of demographic uncertainty in world regions Vladimir Borgy and Juha M. Alho; 11. Informational assumptions, aggregate mortality risk and life cycle saving Juha M. Alho and Niku Määttänen; 12. Longevity adjustment of retirement age and intergenerational risk sharing Svend E. Hougaard Jensen and Ole Hagen Jørgensen; 13. A general equilibrium analysis of annuity rates in the presence of aggregate mortality risk Justin van de Ven and Martin Weale; Comment: the economics of demographic uncertainty Martin Flodén; Index.
'In this volume economists for the first time come to grips with the substantial impact of demographic uncertainty on the economy and public finances. It contains not only important methodological contributions but also provides fresh insights on how demographic risks can best be shared across generations.' Lans Bovenberg, Director, Netspar, Tilburg University
'Due to population aging, public pensions and health-care systems are under pressure throughout the industrial world and beyond. But this pressure is mostly seen in long-term projections of unsustainability. It is difficult for governments to sell painful reforms such as privatization and delayed retirement in the face of uncertain futures. This timely and important book, edited by a world leader in the field, provides an explicit state-of-the-art evaluation of uncertainty in budget projections.' Ronald Lee, Edward G. and Nancy S. Jordan Endowed Chair in Economics and Professor of Demography and Economics, University of California, Berkeley