Working Papers,
National Institute of Economic Research

Abstract: The general government in Sweden runs an enormous current budget deficit and the public debt is increasing rapidly. The paper investigates the effects of a stabilization of the economy for different generations. The results for Sweden show that it is feasible to pay back the public debt and still have an increasing disposable lifetime income in the future. The main reason why future generations are going to be better off than the current ones is that the increase in wages, due to growth in productivity, completely dominates over the reallocation between generations through the public sector. However, for most sustainable stabilization policies, individuals born before 1925 have to pay less in taxes than they get back in transfers, pensions and public goods, while individuals born after 1925 have to pay more than they get in return.

47 pages, January 1, 1996

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