A comparative study of countries in fiscal responses during the period of population aging: focusing on the cases of Sweden, France, UK and Japan

Abstract

France, the UK, and Japan, four countries where population aging has been underway since early on, suggests that as their population aging progressed, public social expenditures increased significantly and economic growth declined, thereby deteriorating the national fiscal condition. While different countries may adopt distinct strategies for public social expenditures, it is common to them all that they must finance these expenditures through tax revenues, social insurance contributions, and deficit spending. The four countries examined trended toward increased tax revenues coinciding with decreased social insurance contributions, or vice versa. It is noteworthy that a substantial government debt could slow economic growth and, furthermore, erode the tax base and social insurance financing. As Korea anticipates its 65-and-older population reaching 20 percent of the national population in just two years, now is the time for the country to start in earnest with the development of strategic approaches to social expenditures and determine an optimal mix of financial sources.