Research On The Impact Of Population Aging On Local Fiscal Sustainabilty ——Based On Threshold Effect

At present,under the background of China’s economic development entering a new normal,the aging process is accelerating,which has had a huge impact on fiscal revenue and fiscal expenditure,and these impacts are ultimately reflected in whether local governments can achieve fiscal sustainability.In terms of fiscal revenue,on the one hand,the aging process means that the working-age population will decrease,which will reduce fiscal revenue by weakening the tax base of individual income tax;on the other hand,the increase in the aging population will drive the development of industries such as the silver-haired economy,expand the tax base of commodity tax and increase the government’s fiscal revenue.Consider the expenditure side,the aging process reduces the amount of labor supply,shrinks the tax base of personal income tax and reduces government tax revenue.According to the principle of determining expenditure based on revenue,it will force the reduction of fiscal expenditure,this is the one hand;on the other hand,the intensified aging of the population means an increase in the number of elderly people receiving endowment insurance,while a relatively decrease in the number of young people paying pensions will directly increase the pressure on local governments to pay pensions.To sum up,the impact of population aging on fiscal revenue and expenditure is uncertain.Therefore,it is necessary to objectively evaluate the impact of population aging on local fiscal sustainability and explore how to improve fiscal sustainability,which has very important practical significance.This paper takes the data of 31 provinces in China from 2005 to 2019 as a sample.Through the analysis of the influence mechanism and the derivation of the construction of a two-period overlapping generation model,it is concluded that there is a threshold effect between population aging and fiscal sustainability,the threshold variable is the elderly’s commodity tax burden.Furthermore,by constructing a panel cointegration model and generalized least squares estimation,it is concluded that the contribution of the elderly in China to the growth of commodity tax is 7.5%,the contribution of young people is 60.8%.Based on this,the paper calculates the commodity tax burden of the elderly and young people in China from 2005 to 2019.It is found that the tax burden levels are ranked from high to low in the eastern,western,central and northeastern regions.Then a panel threshold model is constructed to analyze the impact of population aging on local fiscal sustainability.The conclusions are as follows:Firstly,China’s population aging and fiscal sustainability have an "L"-shaped relationship.The threshold value of commodity tax borne by the elderly accounts for about 0.51% of GDP.The deepening of the aging degree is not conducive to the realization of fiscal sustainability,but this inhibitory effect will gradually weaken with the increase of the commodity tax burden on the elderly.Secondly,from the perspective of different regions,the effect of population aging on the fiscal sustainability of different regions is also different.The central,western and northeastern regions are similar to the national average.When the commodity tax burden of the elderly exceeds the threshold,the increase in commodity tax brought by the elderly will help to partially alleviate the financial burden brought by the aging itself.The aging coefficient in the eastern region turns from positive to negative on both sides of the threshold,indicating that population aging begins to have a positive impact on fiscal sustainability.Finally,the paper makes policy recommendations: first,implement the delayed retirement policy;second,support the development of the aging industry;third,improve the pension security level.