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Aging and Social Policy: An International Perspective

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Title: Aging and Social Policy: An International Perspective


1
Aging and Social PolicyAn International
Perspective
  • Andrew Mason
  • Sang-Hyop Lee
  • Ronald Lee
  • Chong-Bum An

2
Outline
  • Background National Transfer Accounts
  • Estimating the Economic Lifecycle
  • Consumption and labor income by age for Korea
  • Comparison with Taiwan and the US
  • The Age Reallocation System
  • Estimates for Korea
  • Comparison to Taiwan and the US
  • Conclusions

3
National Transfer Accounts
  • System for measuring economic flows across age
    groups in a manner consistent with National
    Income and Product Accounts
  • Comprehensive
  • Asset-based reallocations
  • Public and private saving
  • Public and private credit
  • Public transfers
  • Private transfers
  • Inter vivos inter-household
  • Intra-household
  • Bequests

4
National Transfer Accounts
  • Issues being explored
  • How do economic support systems evolve within
    countries and differ across countries?
  • How do economic support systems interact with age
    structure to influence macro-economic performance
    and generational equity?
  • How should policies with respect to public
    pensions, health care, and education change over
    time?
  • What are the appropriate roles of the family and
    the state in providing support to children and
    the elderly?

5
NTA Project Organization
  • Coordination
  • Ronald Lee (UC Berkeley)
  • Andrew Mason (East-West Center/UH)
  • Core support National Institute on Aging
  • Website www.ntaccounts.org
  • Countries currently participating in the project
  • Korea An Chong-Bum (SungKyunKwan University)
  • Taiwan Andrew Mason and An-Chi Tung (Academia
    Sinica, Taipei)
  • US Ronald Lee
  • 14 other countries are members of the project

6
(No Transcript)
7
II. The Economic Lifecycle
8
The Economic Lifecycle of Korea, Annual Aggregate
Flows, Nominal Values, 2000
Surplus
Labor Income
Consumption
Deficits
9
Features of the Economic Lifecycle
  • Age refers to people not household heads.
  • Consumption
  • Includes all public and private consumption
  • Age allocation is based on consumption surveys
    (private) and administrative records (public)
  • Labor income includes
  • wages and salaries
  • labors estimated share of mixed income
  • taxes paid by employers on behalf of employees
    including a portion of indirect taxes

10
Lifecycle of Korea (2000), Per Capita Values
Labor Income
Female LFPRs
C declines with age
Consumption
Education Spending
11
Lifecycle of Taiwan (1998) and Korea (2000), Per
Capita Values
Labor Income
T
K
Lower C in ROK
Consumption
T
K
Higher LFPRs In ROK
12
Lifecycle of US (2000) and Korea (2000), Per
Capita Values
US LFPRs gt ROK LFPRs
US
Labor Income
US
K
High US C is health care
Consumption
K
ROK LFPRs gt US LFPRs
13
Some Implications
  • A given rise in the older population has a much
    greater impact in the US given current LC.
    However, aging is much more rapid in ROK.
  • Importance of female employment.
  • Reducing the LC deficit at old ages is not simply
    a matter of higher LFPRs among the elderly. High
    productivity jobs needed.
  • Rising health care costs is the Achilles heel if
    US experience is any guide.

14
The Age Reallocation System
Table 1. A Classification of NTA Reallocations (revised 1/13/06). Table 1. A Classification of NTA Reallocations (revised 1/13/06). Table 1. A Classification of NTA Reallocations (revised 1/13/06). Table 1. A Classification of NTA Reallocations (revised 1/13/06).
Asset-based Reallocations Asset-based Reallocations Transfers
Capital and Other Non-Financial Assets Credit Transfers
Public Public infrastructure Public land and sub-soil minerals Public debt Student loans Money Public education Public health care Unfunded pension plans
Private Housing Consumer durables Factories, Farms Private land and sub-soil minerals Inventories Consumer credit Familial support of children and parents Bequests Charitable contributions
Source Adapted from Lee 1994. Source Adapted from Lee 1994. Source Adapted from Lee 1994. Source Adapted from Lee 1994.
15
The Transfer Option
Tax workers. Provide cash and in-kind payments to
the elderly
Consumption
Labor Income
16
The Saving Option
Labor Income
Invest
Consumption
Asset Income Dissaving
17
Transfers vs. Saving
  • Both can satisfy reallocation objectives.
  • Transfers can do so immediately saving only with
    a delay.
  • Saving is pro-growth.
  • Other research shows that aging can lead to
    substantial capital deepening if transfer
    programs are kept in check.

18
Age Reallocations, Korea, 2000, Per Capita Annual
Flows
Total Inflows
Total Outflows
19
How are Taiwan, Korea, and the US financing
old-age consumption?
Asset-based reallocations much greater in the US!
Total transfers much greater in Korea
Large public transfers in US
Note. Familial transfers do not include bequests.
20
Why are asset-based reallocations so low in Korea
and Taiwan?
  • Did familial transfers crowd out saving?
  • Did familial transfers fill a gap that saving
    could not meet?
  • High rates of growth in Korea and Taiwan led a
    6-fold increase in lifetime earnings each
    generation.
  • Unlikely that saving rates could be high enough
    to achieve the flat age profiles of consumption.

21
Lesson to Draw
  • Familial transfers served East Asia well by
    maintaining generational equity during a period
    of very rapid economic growth.
  • Slower economic growth and population aging ?
    shift to asset-based reallocations.
  • High saving rate and shift away from familial
    support systems are welcome developments.

22
The End
23
NT Flow Account Identity
  • Inflows
  • Labor income
  • Capital income
  • Interest income
  • Transfer inflows
  • Outflows
  • Consumption
  • Investment
  • Accumulation of credit
  • Transfer outflows

24
NT Flow Account Identity
Lifecycle Deficit
Age Reallocations
Capital-based Reallocations
Credit-based Reallocations
Net Transfers
25
NT Flow Account, Aggregate. Taiwan, 1998 (NT billion), nominal NT Flow Account, Aggregate. Taiwan, 1998 (NT billion), nominal NT Flow Account, Aggregate. Taiwan, 1998 (NT billion), nominal NT Flow Account, Aggregate. Taiwan, 1998 (NT billion), nominal NT Flow Account, Aggregate. Taiwan, 1998 (NT billion), nominal NT Flow Account, Aggregate. Taiwan, 1998 (NT billion), nominal NT Flow Account, Aggregate. Taiwan, 1998 (NT billion), nominal
Age Age Age Age Age
  Total 0-19 20-29 30-49 50-64 65
Age Reallocations 832 1894 6 -1569 -25 526
Asset-based reallocations 861 -16 -210 605 299 184
Asset Income 2,456 3 139 1492 585 237
Less Saving 1,595 19 349 887 286 54
Transfers -29 1910 216 -2174 -323 342
Public, current 2 579 76 -692 -138 176
Private, current -31 1330 65 -1568 -95 236
Capital transfers 0 0 75 86 -91 -70
Lower panel measures the reallocation systems
employed to satisfy the lifecycle deficits and
surpluses at each age. Asset-based reallocations
combine capital, other non-financial assets, and
credit.
Source Mason, Lee, Tung, Lai, and Miller,
forthcoming.
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