Abstract:
Transition to aging society of Thailand comes faster than expectation. The government should manage the government expenditure and the revenue collection in according with the increasing of the elders in the society, especially old aged allowance expenditure that is determined to pay for all of the elders except the people in pension system. This paper examines the impact of demographic change on fiscal sustainability of old aged allowance policy, particularly by setting model, where a computational overlapping generations model is used under a general equilibrium context. This model can show the dimension of transition from the current situation to old aged society. The simulation is divided to 3 parts that consist of the First Part is the impact of demographic change on the economy, the Second Part is the impact of demographic change to fiscal burden and the Third Part is how to finance to respond the increasing of government expenditure. The study found that the government expenditure will increase caused by transition to old aged society and the longer life of population. The increasing of government expenditure causes the increasing of public debt and the increasing of public debt brings the avoiding repayment of public debt and shift to next generation. The increasing of VAT makes the revenue collection of the government more than increasing personal income tax. The value-added tax causes the impact from distortionary effect to the economy more than personal income tax.