Abstract for: Ageing and the Sustainability of Public Expenditure: SD Based Policy Analysis
Societal ageing is a major issue in many developed economies, with a great chance of leading to unsustainable public expenditure. In this study, we address this issue by testing several policies, separate and in combinations, for their robustness under uncertainty. These policies include changing the retirement age, addressing unhealthy life styles, increasing labour participation, and labour productivity. They are tested for their robustness in ensuring sustainability of government contributions to basic state pensions and public expenditure on health care. The conclusion of this study is that even when uncertainty is taken serious, adaptive policies like coupling retirement age to the life expectancy are still too conservative. Further, even with the policy combinations discussed in this paper, especially health care expenditure may still rise above sustainable level.