Generational accounts for the Netherlands: An update

This paper extends the standard generational accounting methodology by incorporating prospective changes in the economic environment, assigning the benefits of government purchases to generations, distinguishing between public consumption and public investment, and transforming the generational accounts into government budgets. It applies the methodology to the Netherlands. An expected increase in labor-force participation almost offsets the adverse effect of aging on the sustainability of the Dutch public finances. Since the rise in labor-force participation occurs before the bulk of the aging, the government will have to run sizable fiscal surpluses in the next decades in order to create the budgetary room for higher age-related government expenditures in later decades.