Year: 2025
Type: article
Abstract: This paper introduces a system dynamics (SD) model for analyzing public sector cost growth, where costs are tied to indices. The SD model isolates the effects of automatic indexation, providing probabilistic projections of expenditure growth. It enables testing of alternative indexation strategies and cost‐reduction measures. Findings show how automatic indexation can accelerate spending during inflation spikes, emphasizing the need for risk‐ and uncertainty‐aware fiscal analysis. Using the Finnish welfare system as an illustrative case, the model output is examined in terms of its value for economic policy planning, providing insights for academics and policymakers.
Source: Public Budgeting & Finance
DOI: 10.1111/pbaf.70007
Authors: Miia Rissanen, Jyrki Savolainen, Mikael Collan
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: hybrid
Estimated APC paid: $3,470
OpenAlex ID: W4416563465