In many OECD countries, the financing of the health systems will be put under severe pressure
over the next decades. Population ageing is likely to increase the demand for health services and to reduce the labour force. Both factors are expected to negatively impact the sustainability of health systems – the former through an increase in government expenditures and the latter through a decrease in government tax revenues that are affected by changes in the labour market.
This is especially worrisome considering that a large proportion of the overall funding of health and old age care services depends on revenues generated out of taxes and/or mandatory social contributions.
This fiscal pressure on government budgets is expected to be asymmetric, both across and within
countries. Such cross-country differences are expected because countries differ with regard to the pace at
which their populations are ageing, as well as funding streams and assignments of expenditures and
revenues across levels of government. With respect to revenues, not only do different government revenue sources have different long-term buoyancies (i.e., sensitivity to economic growth) but also some sources may be more heavily affected by demographic and labour force changes than others.
This study is part of a larger project aimed at assessing long-term fiscal challenges for OECD
countries due to population ageing. This paper focuses exclusively on government revenues, while another study examines government expenditures on health (see de Biase et al., 2022).
The main goal of this study is to quantify the magnitude of population ageing on tax revenues from different levels of government. Considering multiple levels of government is particularly important for policy recommendation purposes given that in a majority of OECD countries, healthcare and old-age care spending are shared between central, local and, if applicable, state governments. Hence, fiscal imbalances caused by population ageing can differ across levels of government and may require reforms either led by a specific level of government or related to intergovernmental fiscal relations. This paper complements other pieces that focus on the impact of population ageing across levels of government (see, for instance, Colin & Brys, 2020) quantifying the impact of population ageing on revenues.
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