Fiscal Policy and Economic Dynamics in Aging Societies
Summary
Global demographic shifts towards increased longevity and falling fertility rates are reshaping public finances and economic growth trajectories. As the proportion of retirees rises, pressures intensify on pension systems, healthcare provision and long-term care expenditure, while shrinking labour forces may slow productivity gains. Policymakers confront the dual challenge of preserving fiscal sustainability—ensuring that debt and deficits remain manageable—while maintaining intergenerational equity. The interplay between public debt management, tax-transfer policies and demographic responses to benefits underscores the need for comprehensive policy packages. Simulation studies using overlapping generations and life-cycle general equilibrium frameworks reveal that carefully calibrated borrowing, targeted support for families and phased pension reforms can stabilise public debt, buffer aggregate demand and modestly influence fertility decisions. Practical applications range from adjusting retirement ages to redesigning child-allowance schemes, illustrating how dynamic fiscal tools can underpin economic resilience in rapidly ageing societies.
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Fiscal Policy and Economic Dynamics in Aging Societies publication trend
The graph below shows the total number of articles in fiscal policy and economic dynamics in aging societies across all publications each year (not limited to Nature Index journals).
Technical terms
Overlapping Generations Model (OLG model): An economic framework that analyses interactions among successive age cohorts to assess long-term fiscal and demographic outcomes.
Life-cycle General Equilibrium Model: A computational tool simulating individual consumption, savings and labour supply decisions over the lifespan under market-clearing conditions.
Debt-to-GDP Ratio: A metric comparing government debt to gross domestic product, indicating a country’s capacity to service its liabilities.
Dependency Ratio: The ratio of non-working (young and elderly) individuals to the working-age population, reflecting the fiscal burden of social support systems.
References
- Child Benefit and Fiscal Burden: OLG Model with Endogenous Fertility. Modern Economy (2011).
- The optimum quantity of debt for an aging Japan: welfare and demographic dynamics. The Japanese Economic Review (2024).
- Fiscal Policy and Redistribution in a Small Open Economy with Aging Population. East Asian Economic Review (2021).
- Japan' s Demographic Dilemma: Navigating the Postpandemic Population Decline. JMA Journal (2024).
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