Fiscal Sustainability and Generational Burden Sharing in Denmark

Svend E. Hougaard Jensen, Ulrik Nødgaard, Lars Haagen Pedersen

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    Based on generational accounts and a simple welfare calculus, this paper studies two alternative scenarios of sustainable fiscal policy in Denmark. A strategy of tax smoothing is found to provide a fairly even intergenerational distribution of the financial burden associated with population ageing. While tax smoothing causes a relatively sharp increase in public debt along the transition path, a strategy of debt smoothing is shown to pass a larger part of the financial burden onto current generations but without changing the intergenerational distribution profile in any dramatic way. A comparison based on a social welfare function indicates a marginal superiority of tax smoothing
    Original languageEnglish
    JournalNordic Journal of Political Economy
    Pages (from-to)43-60
    Number of pages18
    Publication statusPublished - Feb 2002

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