Generational accounting of public finances in Portugal

The project Generational accounting of public finances in Portugal, a partnership between Institute of Public Policy and Economics for Policy (from NOVA-SBE), financed by Calouste Gulbenkian Foundation, intendes to make known the real value of the obligations imposed on future generations, based on the commitments already assumed by the State, and aims to develop a methodology to determine the net contribution of each generation to the State Budget.

The key question we want to answer is under the current policies, how much is the net contribution of current generations and what is the burden left for the future generations?

Upon completion, we shall be able to provide a comprehensive answer to our research challenge – the net contribution of current generations and the burden left for the future generations –, in two key incremental dimensions:

1 – The result of a generational accounting approach to the current situation of public finances in Portugal and preliminary insights on the policy changes needed to achieve a generationally balanced fiscal policy.

  • How much do the benefits of public spending for people in Portugal vary as a function of their age? And of costs (taxation)?
  • How much, in net terms, over their remaining lifetime, is each generation (cohort) expected to pay, in euros, to fund the government?
  • How good/bad a deal is it for each cohort, in terms of the public services they get in return?
  • What can be done to correct or compensate for unfair outcomes, if any?

2 – The result of a more sophisticated approach allowing to explain the generational impacts of fiscal policy over recent decades, and either dispel the idea that such policy has left behind an unjust burden, imposed by previous cohorts, on current working generations, or estimate an appropriate measure of that burden and pinpoint its underlying causes.

  • How much, in net terms, over their complete lifecycle, has each generation (cohort) paid, and is expected to pay, in euros, to fund the government?
  • How have the costs/benefits of government, over complete lifecycles, evolved over time, for the different generations (cohorts)? Why?
  • What can be done to correct or compensate for unfair outcomes, if any?

Team

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Francesco Franco

(coordinator)

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Luís Teles Morais

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João Jalles

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Tiago Bernardino