New Working Paper in the IDEAGOV Working Paper Series
- 4 days ago
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A new contribution to the IDEAGOV Working Paper Series examines one of the most pressing long-term challenges facing European public finances: population ageing. In "The Impact of Population Ageing on Public Finances in the EU-27", María Cadaval-Sampedro, Santiago Lago-Peñas, Xoaquín Fernández-Leiceaga and Alejandro Domínguez-Lamela (Universidade de Santiago de Compostela) analyse how demographic change affects age-related public expenditure across the European Union.
Using data from the 27 EU Member States covering the period 1992–2024, the study investigates the relationship between population ageing and public expenditure on healthcare, long-term care, and pensions. Combining dynamic econometric models with cluster analysis, the authors explore how different institutional settings shape governments' fiscal responses to demographic change.
The results reveal that the fiscal effects of ageing are far from uniform across Europe. While increases in the elderly population generally place upward pressure on age-related expenditure, the magnitude and timing of these effects differ considerably across countries and expenditure categories. Advanced ageing—measured by the share of the population aged 80 and over—plays a particularly important role in explaining long-term healthcare expenditure, whereas short-run responses vary substantially depending on national welfare systems and fiscal institutions.
The analysis also identifies clear geographical and institutional patterns. Western and Nordic countries tend to exhibit stronger and more persistent expenditure adjustments, while many Central and Eastern European economies show weaker or delayed fiscal responses. These differences suggest that institutional design, rather than demographic change alone, largely determines how governments adapt to ageing populations.
Overall, the paper challenges the view that population ageing automatically translates into unsustainable public finances. Instead, it demonstrates that the fiscal consequences of ageing depend critically on countries' policy frameworks, institutional capacity, and welfare-state arrangements, providing valuable insights for the design of sustainable public finance policies across Europe.
📄 The Working Paper is available at:
