The effect of dependent population on public finance: The example of OECD

Population aging caused by the change in population age structure has significant effects on financial sustainability. While the tax base, narrowing as a result of the decrease in the workforce, creates a decrease in public revenues, the increasing elderly dependent population causes increases in public expenditure items (health, social security, retirement, medical care, etc.). In this direction, the study carries out a quantitative analysis of the effect of the increase in the elderly dependency ratio, which has occurred as a result of the change in the age structure of the population, on the public financial system. The analysis is based on the methodology created by the change in the age structure of the population, the cost and income changes observed in the public income and expenditure items. In the research, dynamic panel data analysis system-GMM approach was adopted. According to the analysis results; There is a 1% positive relationship between the elderly dependent ratio and budget deficits. On the other hand, it has been observed that the elderly dependency ratios have a positive effect on public expenditures and are in a significant relationship. Keywords: Population Age Structure, Ageing, Budget Deficits, Financial System, Dependency Rates