A cell based approach to modelling public expenditure

The paper examines the use of a cell based model to analyse the effects of demographic change on the level and distribution of public expenditure. The nature and advantages of a cell based model for this purpose are described. The level and distribution of the key components of welfare state expenditure—health, education, social security—and of direct taxes, is examined for the base year of 1985. The net transfer of resources is compared to the distribution of income across cells. The effect of demographic change on the level and distribution of health and education expenditure is analysed. Issues in the further development of this approach are then reviewed.