Abstract
We use recent population projections to describe briefly the process of demographic ageing expected to occur in the Canadian province of Quebec between 2010 and 2056. We next provide a quantitative assessment of the consequences of the demographic transition by projecting Quebec’s budgetary balance until 2056. A problem of fiscal sustainability is quickly identified. We then examine how sensitive the projection results are to demographic and economic assumptions. Finally, we explore the significance of assuming that health expenditures in the last year of life are several times larger than for survivors. Under this alternative assumption, health spending decreases by a small, but significant, amount in the long run.
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Notes
- 1.
Quebec is the second largest of the ten Canadian provinces. In 2009, its population was 7.8 million (23.2% of the Canadian total), and its GDP was C$304 billion (20% of the Canadian total).
- 2.
- 3.
In 2008, federal government spending amounted to 27% of total public sector expenditure in Quebec. The rest was shared among provincial government ministries and agencies (56%) and local governments (17%). In turn, local governments are under the authority of the provincial government.
- 4.
Although it has broad intergenerational consequences, the approach of Blanchard et al. (1990) is mainly concerned with fiscal sustainability in a macroeconomic sense. It differs from Kotlikoff’s (1992) generational accounting framework, which proposes a cohort-by-cohort microeconomic analysis of tax payments and transfer receipts over the life cycle.
- 5.
Sources: Statistics Canada (2011), Table 052-0004; US Census Bureau, Population Division.
- 6.
Sources: Statistics Canada (2011), Table 282-0051, ISQ and OECD.
- 7.
The employment rate is defined here as the total number of hours worked in a year, per capita.
- 8.
Section 3.6, however, will also consider an alternative approach, by which health expenses depend instead on how close to death each person is.
- 9.
The model applies the same employment and productivity rates for people joining the pool of potential workers regardless of their origin.
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Acknowledgements
We thank the Research Chair in Taxation and Public Finance of the Université de Sherbrooke for financial support and Matthieu Arseneau for helpful comments.
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Godbout, L., St-Cerny, S., St-Amant, PA.B., Fortin, P. (2012). Quebec’s Public Finances Between Demographic Changes and Fiscal Sustainability. In: De Santis, G. (eds) The Family, the Market or the State?. International Studies in Population, vol 100. Springer, Dordrecht. https://doi.org/10.1007/978-94-007-4339-7_3
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