- 14 January 2009
- WORKING PAPER SERIES - No. 994Details
- In this paper we examine the sustainability of euro area public finances against the backdrop of population ageing. We critically assess the widely used projections of the Working Group on Ageing Populations (AWG) of the EU's Economic Policy Committee and argue that ageing costs may be higher than projected in the AWG reference scenario. Taking into account adjusted headline estimates for ageing costs, largely based upon the sensitivity analysis carried out by the AWG, we consider alternative indicators to quantify sustainability gaps for euro area countries. With respect to the policy implications, we assess the appropriateness of different budgetary strategies to restore fiscal sustainability taking into account intergenerational equity. Our stylised analysis based upon the lifetime contribution to the government's primary balance of different generations suggests that an important degree of pre-funding of the ageing costs is necessary to avoid shifting the burden of adjustment in a disproportionate way to future generations. For many euro area countries this implies that the medium-term targets defined in the context of the revised stability and growth pact would ideally need to be revised upwards to significant surpluses.
- JEL Code
- H55 : Public Economics→National Government Expenditures and Related Policies→Social Security and Public Pensions
H60 : Public Economics→National Budget, Deficit, and Debt→General
- 12 July 2017
- WORKING PAPER SERIES - No. 2087Details
- This paper presents new evidence on the impact of the preferential treatment of owner-occupied housing in Europe. We find that tax benefits to homeowners reduce the user cost of housing capital by almost 40 percent compared to the efficient level under neutral taxation. On average, the tax subsidy translates into an excess consumption of housing services equivalent to 7.8 percent of the value of owner-occupied housing, or about 30 percent of financial asset holdings in household portfolios. The bulk of the subsidies stems from under-taxation of the return to home equity, while the average contribution of the tax rebate for mortgage interest payments is driven down by relatively low loan-to-value ratios in the data. However, at the margin, the tax–induced incentive to use mortgage debt to finance the purchase of the main residence is sizable.
- JEL Code
- H24 : Public Economics→Taxation, Subsidies, and Revenue→Personal Income and Other Nonbusiness Taxes and Subsidies
H31 : Public Economics→Fiscal Policies and Behavior of Economic Agents→Household
D14 : Microeconomics→Household Behavior and Family Economics→Household Saving; Personal Finance
- Household Finance and Consumption Network (HFCN)