A Note on Public-Debt Sustainability in an Economy with Declining Fertility
Jahrgang 68 (2012) / Heft 2, S. 153-164 (12)
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This note studies the relationship between population change and a government's longterm fiscal health. It uses an equilibrium model with dynamic optimization to investigate a situation in which a government repays its fiscal liabilities using tax revenues. The focus is on an upper bound on fiscal liability that is compatible with a no-Ponzi-game condition. The investigation deals, in particular, with how the upper bound depends on population size, population growth rate, and primary fiscal balance per person.