Population%20Aging,%20Intergenerational%20Transfers,%20and%20the%20Economy:%20Introducing%20Age%20into%20National%20Accounts - PowerPoint PPT Presentation

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Population%20Aging,%20Intergenerational%20Transfers,%20and%20the%20Economy:%20Introducing%20Age%20into%20National%20Accounts

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Title: Population%20Aging,%20Intergenerational%20Transfers,%20and%20the%20Economy:%20Introducing%20Age%20into%20National%20Accounts


1
Population Aging, Intergenerational Transfers,
and the Economy Introducing Age into National
Accounts
  • Andrew Mason
  • University of Hawaii Manoa
  • East-West Center

2
Motivation
  • Three features of the economy
  • Economic lifecycle
  • Population age structure
  • Systems for shifting resources across age
  • Saving
  • Public transfer programs
  • Familial Support systems
  • Interaction influences economic performance and
    generational equity
  • Implications for economic and population policy

3
Organization
  • Fundamental Ideas
  • Brief Review of Recent Research
  • Current Effort National Transfer Accounts
  • Basic Concepts
  • Three Important Issues

4
FundamentalsThe Economic Lifecycle
Labor Income
Consumption
Note Based on estimates for Costa Rica,
Indonesia, Taiwan, and Thailand.
5
A Simple Model
  • Consumption-Loan Economy (Samuelson 1958)
  • Labor income only
  • All output is immediately consumed
  • Age reallocation system Transfers only no
    saving
  • Per capita age profiles of consumption and
    production are fixed (preceding slide)
  • Population age structure varies
  • Young US 1850
  • Middle-aged India 2040
  • Old Japan 2050

6
Aggregate C and YLVery Young Population (US 1850)
7
Aggregate C and YLVery Young Population (US 1850)
8
Aggregate C and YLLarge Working-age Pop (India
2040)
9
Aggregate C and YLOld Population (Japan 2080)
10
First Demographic DividendEconomic Support Ratio
Ratio of effective workers to effective consumers
Source Mason 2007.
11
Summary of Implications
  • Changes in the relative numbers of workers and
    consumers over the demographic transition leads
    to a demographic dividend.
  • Bloom and Williamson
  • Bloom, Canning, and Sevilla
  • Lee and Mason
  • The effect erodes as populations age.

12
Introduce Capital to the Economic Model
  • Economy with capital
  • Workers save during their working years
  • Rely on asset income and dis-saving during
    retirement.
  • For solving the old-age lifecycle problem,
    capital and transfers are close substitutes.
  • However, capital also has favorable effects on
    economic growth.

13
What determines the lifecycle demand for capital?
  • Features of the economic lifecycle
  • Consumption by the elderly (now future)
  • Labor income of the elderly (now future)
  • Relative number of elderly More elderly implies
    greater demand for lifecycle capital.

14
Demand for WealthOld versus Young Population
Young Population
Old Population
Yl
Yl
C
C
LC demand for wealth is negligible
LC demand for wealth is large
Note Uses per capita consumption profiles shown
above.
15
What determines the lifecycle demand for capital
(continued)?
  • Support system for the elderly
  • Public transfers
  • Familial transfers
  • Lifecycle saving
  • Public and familial transfers may crowd out
    lifecycle saving

16
II. Summary of Recent Research
  • Population, Saving, and Wealth
  • Changes in age structure are partially
    responsible for high saving rates in Asia (LMM
    various KM 2007).
  • Longer life expectancy led to behavioral change
    that reinforced age structure effects (LMM
    various KM 2007).
  • A decline in familial support for the elderly may
    have played an important role (LMM 2003).
  • Longer life expectancy and aging are leading to a
    permanent increase in wealth (LMM various KM
    2007)

17
II. Summary of Recent Research
  • Demographic Dividends
  • Changes in age structure produce two demographic
    dividends
  • First dividend
  • Concentration of population in working ages leads
    to more rapid economic growth
  • Effect unwinds as populations age.
  • Second dividend changes in age structure and
    increase in life expectancy lead to
  • More investment and more rapid economic growth
  • Permanently higher standards of living.
  • Sources Mason and Lee, various Mason, various.

18
Important Issues to be Explored
  • How does the economic lifecycle vary and why?
  • What systems do societies use to shift resources
    from surplus to deficit ages?
  • Why do the systems vary across countries and
    evolve over time?
  • What are the implications for economic
    performance? For generational equity?
  • What are the implications for economic policy?
    For population policy?

19
III. National Transfer Accounts
  • Objective
  • Develop and apply a comprehensive system of
    accounts that measures economic flows across age
    groups in a manner consistent with the System of
    National Accounts.
  • Conceptual foundation
  • Lee (1994) but also Samuelson (1958), Diamond
    (1965), and Willis (1988).
  • Organization
  • Collaboration between EWC/UH and UC-Berkeley.
    Core funding from NIA. Sub-projects supported by
    UNFPA, IDRC, MacArthur Foundation and others.
  • Website www.ntaccounts.org

20
Participating Countries
Asia/Oceania China India Indonesia Japan Korea, S. Philippines Taiwan Thailand Australia Europe Austria Finland France Hungary Slovenia Sweden N America United States Latin America Brazil Chile Costa Rica Mexico Uruguay Africa Kenya Nigeria
21
Labor Income
Consumption
Source Ogawa et al. 2007.
22
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23
Governments Families Charitable Organizations
24
Accumulation and dis-accumulation of assets
Accumulation and dis-accumulation of debt
25
The Flow Account Identity
  • Inflows
  • Labor Income
  • Asset Income
  • Transfer Inflows
  • Outflows
  • Consumption
  • Saving
  • Transfer Outflows

26
Flow Account Details
  • Consumption public and private for health,
    education, housing, and other.
  • Public transfers in-kind (health, education,
    other) and cash (pensions and other).
  • Private transfers intra-household for health,
    education, housing, and all other
    inter-household for other.
  • Asset-based reallocations Public and private
    investment public and private credit/debt.
  • Flows to ROW remittances, foreign investment,
    foreign aid.

27
Approach to Estimation
  • National Income Accounts and other aggregate
    statistics are used as aggregate controls
  • Age profiles are estimated using nationally
    representative surveys, e.g., income and
    expenditure surveys, labor force surveys, health
    expenditure surveys, etc.
  • Common methodology documented on
    www.ntaccounts.org

28
Issue 1 Lifecycle Deficit, Children
  • Does the lifecycle deficit per child increase as
    the number of children declines?
  • Becker quality-quantity tradeoff
  • If so, the decline in fertility will have a
    smaller effect on capital accumulation.
  • However, if consumption is higher because parents
    are spending more on education, then human
    capital will increase as the number of children
    declines.

29
Per Capita Lifecycle Deficit, Japan 2004,
Survival Weighted
Note. US 1985-89 life table used for all
countries.
30
Tradeoff Spending per Child and Number of
Children, 13 Countries
31
Tradeoff Spending per Child and Number of
Children, 13 Countries
Jp
US
Ch
Tw
SK
Th
Sw
Fr
Indo
Ur
CR
In
Ph
32
Issue 2 Lifecycle Deficit, Elderly
  • Does the lifecycle deficit per elderly decline as
    the number of elderly rises?
  • Preston and others argue yes political power.
  • If so, the rise in the old-age population may
    lead to a greater fiscal burden.

33
Tradeoff Spending per Elderly and Number of
Elderly, 13 Countries
34
Tradeoff Spending per Elderly and Number of
Elderly, 13 Countries
Ur
Jp
US
CR
Fr
Tw
Th
Ch
Sw
SK
Ph
In
Indo
35
Issue 3. Support Systems for the Elderly.
  • How do they differ across countries?
  • Do Asian countries rely more on familial
    transfers and Western and Latin American
    countries more on public transfers?
  • Does the expansion of public systems crowd saving
    as hypothesized by Feldstein?
  • Or familial transfers?

36
Old-Age Reallocation Systems
Saving
Capital-based transformation
Social welfare transformation
Traditional society?
Familial Transfers
Public Transfers
37
Old-Age Reallocation Systems
Saving
Public transfers and familial transfers are
substitutes (Barro).
Familial Transfers
Public Transfers
38
Old-Age Reallocation Systems
Saving
Public transfers to the elderly crowd out saving
(Feldstein).
Familial Transfers
Public Transfers
39
Reallocations as a share of lifecycle deficit of
the elderly.
40
Net public transfers downward
Reallocations as a share of lifecycle deficit of
the elderly.
41
Net family transfers downward
Net public transfers downward
Reallocations as a share of lifecycle deficit of
the elderly.
42
Reallocations as a share of lifecycle deficit of
the elderly.
43
Combined net transfer downward
Reallocations as a share of lifecycle deficit of
the elderly.
44
Familial transfers equally important in Thailand,
Korea, and Taiwan (36-40).
Net familial transfers near zero in US, CR, and
J. Large public transfers in CR and J. More
reliance on assets in CR US.
Net public transfers to elderly are zero in
Thailand about 25 in Taiwan and Korea.
45
Reliance on assets in old-age
46
65-year-olds 67 assets, 2 public, 32 private
85-year-olds 23 assets, 39 public, 38 private
47
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48
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49
From ages 65 to 80, familial share varies little.
Public rising and asset-based declining.
After 80 familial share is rising and asset-based
declining.
50
Asset-based reallocations and public transfers
have increased over time familial transfers have
declined precipitously.
NHI began in 1995 net public transfers increased.
51
Summary of Support Systems
  • Estimates are preliminary
  • Old-age support systems
  • Show wide variation
  • Vary with the age of the elderly
  • Are changing rapidly
  • Familial support system for the elderly
  • Small in high-income countries (West and Japan)
  • Upward in rest of Asia, but declining over time
  • Downward in Latin America

52
Warnings!
  • NIPA and NTA are incomplete
  • Time
  • Environment
  • Aggregate data vary in quality and coverage
  • Imputing values to individuals based on values
    for households is difficult

53
Final Remarks
  • Economic resources shifted across age are
    enormous.
  • Important in many respects
  • Accumulation of human and physical capital
  • Generational equity
  • Economic growth
  • Externalities to childbearing
  • Measuring and studying these flows is difficult
    but essential.

54
Support for this project has been provided by
  • National Institute on Aging R37-AG025488 and
    R01-AG025247
  • NUPRI Academic Frontier Project, Government of
    Japan
  • John D. and Catherine T. MacArthur Foundation
  • International Development Research Center
    (IDRC)
  • United Nations Population Fund (UNFPA)

55
The National Transfer Accounts project is a
collaborative effort of East-West Center,
Honolulu and Center for the Economics and
Demography of Aging, University of California -
Berkeley

Lee, Ronald, Co-Director Mason, Andrew , Co-Director Auerbach, Alan Miller, Tim Lee, Sang-Hyop Donehower, Gretchen Ebenstein, Avi Wongkaren, Turro Takayesu, Ann Boe, Carl Comelatto, Pablo Sumida, Comfort Schiff, Eric Stojanovic, Diana Langer, Ellen Chawla, Amonthep Pajaron, Marjorie Cinco
56
Japan Key Institutions Nihon University
Population Research Institute and the Statistics
Bureau of Japan, Tokyo, Japan. Ogawa, Naohiro,
Country Leader Matsukura, Rikiya
Maliki Obayashi, Senichi Kondo, Makoto Fukui,
Takehiro Ihara, Hajime Suzuki, Kosuke Akasaka,
Katsuya Moriki, Yoshie Makabe, Naomi Ogawa,
Maki
57
Australia Key Institution Australia National
University Jeromey Temple, Country Leader Brazil
Turra, Cassio, Country Leader Lanza Queiroz,
Bernardo Renteria, Elisenda Perez Chile Key
Institution United Nations Economic Commission
for Latin America and the Carribean, Santiago,
Chile Bravo, Jorge Mauricio Holz
58
China Key Institution China Center for Economic
Research, Beijing, China. Ling, Li, Country
Leader Chen, Quilin Jiang, Yu
Taiwan Key Institution The Institute of
Economics, Academia Sinica, Taipei, Taiwan.
Tung, An-Chi, Country Leader Lai, Mun Sim
(Nicole) Liu, Paul K.C. Andrew Mason
59
France Wolff, Francois-Charles, Country Leader
Bommier, Antoine Thailand Key Institution
Economics Department, Thammasat University.
Phananiramai, Mathana, Country Leader Chawla,
Amonthep (Beet) Inthornon, Suntichai India Key
Institution Institute for Social and Economic
Change, Bangalore Narayana, M.R., Country Leader
Ladusingh, L. Mexico Key Institution Consejo
Nacional de Población Partida, Virgilio, Country
Leader Mejía-Guevara, Iván
60
Indonesia Key Institution Lembaga Demografi,
University of Indonesia, Jakarta, Indonesia.
Maliki, Country Leader Wiyono, Nur Hadi
Nazara, Suahasil Chotib Philippines Key
Institution Philippine Institute for Development
Studies. Racelis, Rachel H., Country Leader
Salas, John Michael Ian S. Pajaron, Marjorie
Cinco Sweden Key Institution Institute for
Future Studies, Stockholm, Sweden. Lindh,
Thomas, Country Leader Johansson, Mats Forsell,
Charlotte
61
Uruguay Bucheli, Marisa, Country Leader
Furtado, Magdalena Rodrigo Ceni Cecilia
Rodriguez South Korea An, Chong-Bum , Country
Leader Chun, Young-Jun Lim, Byung-In Kim,
Cheol-Hee Jeon, Seung-Hoon Gim, Eul-Sik
Seok, Sang-Hun Kim, Jae-Ho
62
Austria Key Institution Vienna Institute of
Demography Fuernkranz-Prskawetz, Alexia, Country
Leader Sambt, Joze Costa Rica Key Institution
CCP, Universidad de Costa Rica Rosero-Bixby,
Luis, Country Leader Maria Paola Zuniga
Slovenia Sambt, Joze, Country Leader
Hungary Key Institution TARKI Social Research
Institute Gal, Robert Medgyesi, Marton
Finland Key institutions The Finnish Center
for Pensions And the Finnish Pension
Alliance Vanne, Reijo Gröhn, Jukka Vaittinen,
Risto
63
United States Key Institution Center for the
Economics and Demography of Aging Lee, Ronald,
Country Leader Miller, Tim Ebenstein, Avi Boe,
Carl Comelatto, Pablo Donehower, Gretchen
Schiff, Eric Langer, Ellen
64
Kenya Mwabu, Germano Nigeria Soyibo, Adedoyin
65
Thank you
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