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GTAP Resource #5543

"Growing old gracefully: fiscal policy for ageing society"
by d'Andria, Diego, Jason Debacker, Richard Evans, Jonathan Pycroft and Magdalena Zachlod-Jelec

The Italian population is shrinking and ageing. The old-age dependency ratio is projected to rise considerably over the coming decades from 33.7% in 2015 to 61.2% in 2060. The Monti’s government of 2011-13 has introduced some measures to address these issues debt sustainability projections from the European Commission point to significant pressure on Italy’s public finances in the medium-term.

In this paper, we evaluate the macroeconomic and intergenerational impact of realistic demographic trends in Italy with a new overlapping generations model named OG-ITA, which is heavily inspired by the open-source model for the United States, OG-USA. Key features of the model include an overlapping generations structure that considers individuals of ages 21 to 100, who are split into seven income-earning ability types. By integrating microeconomic data and simulations from the EUROMOD microsimulation model into the overlapping generations macro model, we can address the dynamic effects of fiscal policies that would counteract the fiscal challenges of ageing populations.

The demographic change effects are obtained by first running a standard version of the model with demographic projections and comparing them with a model version with fixed (as of 2015) rates of population growth. We furthermore simulate pension reforms, including raising the age at which one receives a public pension. The results confirm the desirability of combining tax and pension reforms to address the challenges of ageing societies, particularly in the case of Italy. The simulations demonstrate the balance between supporting growth and prosperity over the short run and avoiding excessive burdens for the future.

Resource Details (Export Citation) GTAP Keywords
Category: 2018 Conference Paper
Status: Published
By/In: Presented at the 21st Annual Conference on Global Economic Analysis, Cartagena, Colombia
Date: 2018
Created: Pycroft, J. (4/14/2018)
Updated: Pycroft, J. (6/17/2018)
Visits: 972
- Dynamic modeling
- Demographics
- Europe (Southern)

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