The Impact of Population Aging on Fiscal Policies in Germany
Fanny Kluge, Max Planck Institute for Demographic Research
This paper will make an effort to answer the question how population aging affects the different layers of government in Germany. I use detailed profiles of public transfer in- and outflows by single years of age, obtained from the National Transfer Accounts project, and decompose them by level of government. In doing so, I am able to assess the need for restructuring allocation rules for government revenues and expenditures. Even in the case of an overall balanced government budget, new allocation rules will inevitably be needed. State and local governments being responsible for education expenditures or childcare are, due to the lower number of children, likely to achieve a balanced budget while the federal budget will face increasing expenditures for the elderly.