The Impact of Population Aging on Fiscal Revenue and Expenditure and Local Government Debt: An Empirical Analysis Based on Panel Data

DOI: https://doi.org/10.62517/jse.202511307

Author(s)

Erjiang Wu1, Yunfeng Li2, Zhao Zhang2, Shaomei Lu1*

Affiliation(s)

1Guangxi Academy of Oceanography, Nanning, China 2The National University of Malaysia, Economics and Management Fuaculty, Kuala Lumpur, Malaysia *Corresponding Author

Abstract

Amid the global trend of aging, this study focuses on the multifaceted impact of population aging on the economy and society, which is of significant theoretical and practical importance. The study uses panel data from multiple regions between 2011 and 2020, sourced from authoritative institutions such as the United Nations Population Division and the World Bank. Using panel data models, and controlling for variables such as regional GDP and savings levels, the study explores the relationship between population aging and tax revenue, local government debt, social security, and employment expenditure. The results show that there is a long-term stable cointegration relationship between the variables. Population aging has an insignificant impact on tax revenue, which is mainly due to the combined effects of factors such as industrial structure, economic policy, labor market changes, and tax policy adjustments, which obscure or weaken its effect on tax revenue. However, population aging has a significant positive impact on local government debt, social security, and employment expenditures. As aging deepens, the demand for pension, healthcare, and other services for the elderly drives the government to increase investment in social security and healthcare. When fiscal revenue is insufficient, local governments expand their debt issuance. At the same time, the growing elderly population directly pushes up social security expenditures, and the difficulties in re-employing elderly workers also increase employment expenditures. Additionally, factors such as regional GDP, savings levels, and total population also have varying degrees of impact on fiscal revenue and expenditure, as well as debt size.

Keywords

Population Aging; Fiscal Revenue and Expenditure; Local Government Debt; Panel Data Model; Cointegration Relationship

References

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