Greying the Budget: Ageing and Preferences over Public Policies

LUIZ DE MELLO, SIMONE SCHOTTE, ERWIN R. TIONGSON, & HERNAN WINKLER

KYKLOS, Volume 70, Issue 1

Abstract: This paper looks at how individual attitudes towards the allocation of government spending change along the life cycle. As individuals age and re-evaluate the benefits and costs of government programs, such as education, healthcare and old-age pensions, they also influence the level and composition of government spending. Using the Life in Transition Survey II for 34 countries of Europe and Central Asia, we find that older individuals are less likely to support hikes in government outlays on education and more likely to support increases in spending on pensions. These results are very similar across countries, and they do not change when using alternative model specifications, estimation methods and data sources. To our knowledge, this the first paper to provide evidence of the “grey peril” effect for a large group of developed, middle-income and low-income economies. Our findings are consistent with a body of literature arguing that conflict across generations over the allocation of government expenditure may intensify in ageing economies.