Transfers in an aging European Union

Population aging and longevity can pose challenges to the sustainability of fiscal budgets. This is of particular concern in Europe's rapidly aging welfare states offering generous social support programs for the elderly. Still, there are differences in the pace of ageing and the generosity of welfare states. We use public tax and benefit age schedules from the National Transfer Accounts project to estimate the impact of population aging on fiscal budgets of single countries and their implications for potential transfer flows in between European Union countries. We show the positive impact of changes in the economic life cycle by working longer and the impact of migration on the redistribution of transfers across Europe. We illustrate the crucial role that demography plays in deepening and reinforcing the fortunes of European finances.