Transcript Slide 1

Population Aging,
Intergenerational Transfers,
and the Economy
Andrew Mason
University of Hawaii – Manoa
East-West Center
National Transfer Accounts
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
National Transfer Accounts
Organization
I.
II.
III.
►
►
Fundamental Ideas
Brief Review of Recent Research
Current Effort: National Transfer
Accounts
Basic Concepts
Three Important Issues
National Transfer Accounts
1.2
1
Labor Income
0.8
0.6
Consumption
0.4
0.2
National Transfer Accounts
Note: Based on estimates for Costa Rica,
Indonesia, Taiwan, and Thailand.
90
84
78
72
66
60
54
48
42
36
30
24
18
12
6
0
0
Relative to labor income(30-49)
Fundamentals
The Economic Lifecycle
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
► Population age structure varies
National Transfer Accounts
Aggregate C and YL
Very Young Population (US 1850)
1600
1400
1200
Deficit for childrenand the
elderly exceeds surplus of
workers. Consumption
must decline.
1000
800
600
400
200
National Transfer Accounts
10
0+
94
90
-
84
80
-
74
70
-
64
60
-
54
50
-
44
40
-
34
30
-
24
20
-
4
10
-1
04
0
C
Yl
Aggregate C and YL
Very Young Population (US 1850)
1600
1400
1200
Consumption drops by
25 percent.
1000
C
Yl
C'
800
600
400
200
National Transfer Accounts
10
0+
20
-2
4
30
-3
4
40
-4
4
50
-5
4
60
-6
4
70
-7
4
80
-8
4
90
-9
4
4
10
-1
04
0
Aggregate C and YL
Large Working-age Pop (India 2040)
120000
Reduction of
consumption of only
3% is needed.
100000
80000
C
Yl
C'
60000
40000
20000
National Transfer Accounts
10
0+
94
90
-
84
80
-
74
70
-
64
60
-
54
50
-
44
40
-
34
30
-
24
20
-
4
10
-1
04
0
Aggregate C and YL
Old Population (Japan 2080)
6000
Old population leads to
26% decline in
consumption.
5000
4000
C
Yl
C'
3000
2000
1000
National Transfer Accounts
10
0+
94
90
-
84
80
-
74
70
-
64
60
-
54
50
-
44
40
-
34
30
-
24
20
-
4
10
-1
04
0
First Demographic Dividend
Economic Support Ratio
1
0.95
0.9
US
Japan
India
0.85
0.8
0.75
18
50
18
70
18
90
19
10
19
30
19
50
19
70
19
90
20
10
20
30
20
50
20
70
20
90
0.7
National Transfer Accounts
Source: Mason 2007.
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.
National Transfer Accounts
Introduce Capital
► 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.
National Transfer Accounts
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.
National Transfer Accounts
Demand for wealth
Old versus Young Population
Young Population
Old Population
6000
1600
1400
Yl
1200
5000
Yl
4000
1000
3000
800
600
C
400
2000
C
1000
200
National Transfer Accounts
LC demand for
wealth is large
10
0+
94
90
-
84
80
-
74
70
-
64
60
-
54
50
-
44
40
-
34
30
-
4
24
20
-
10
-1
10
0+
90
-9
4
80
-8
4
70
-7
4
60
-6
4
50
-5
4
40
-4
4
30
-3
4
20
-2
4
10
-1
4
04
LC demand for
wealth is negligible
04
0
0
What determines the lifecycle
demand for capital (continued)?
► Support
system for the elderly
 Importance of the capital system
 Familial and public transfer systems undermine
capital accumulation
National Transfer Accounts
II. Summary of Recent Research
► Population,
Saving, and Wealth
 Changes in age structure are only partially responsible
for high saving rates in Asia (LMM various; KM 2007).
 Longer life expectancy led to a 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).
 Aging will lead to somewhat lower saving (LMM various)
or not (KM 2007).
 Longer life expectancy and aging are leading to a
permanent increase in wealth (LMM various; KM 2007)
National Transfer Accounts
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
rapid economic growth
► Permanently higher economic growth.
Sources: Mason and Lee, various; Mason, various.
National Transfer Accounts
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?
National Transfer Accounts
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 and others.
►
Website: www.ntaccounts.org
National Transfer Accounts
Participating Countries
ASIA
EUROPE
LATIN AMERICA
China
India
Indonesia
Japan
Korea, S.
Philippines
Taiwan
Thailand
Austria
France
Hungary
Slovenia
Sweden
Brazil
Chile
Costa Rica
Mexico
Uruguay
NORTH AMERICA
OCEANIA
United States
National Transfer Accounts
Australia
National Transfer Account Flows
Labor
Income
Dis-saving
& Interest
income
Asset
System
Transfers
Age
Group
Saving &
Interest
expense
Transfer
System
Transfers
Consumption
National Transfer Accounts
Inflows
Outflows
The Flow Account Identity
► Inflows
► Outflows
 Labor Income
 Asset Income
 Transfer Inflows
 Consumption
 Saving
 Transfer Outflows
Y (a )  Y (a )   (a)  C (a )  S (a )   (a )
l
a


Inflows
Outflows
C (a)  Y l (a)  Y a (a)  S (a)    (a)    (a)
Lifecycle Deficit
Asset-based Reallocations
Net Transfers
Age Reallocations
National Transfer Accounts
Detailed National Transfer Flow
Account
► 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.
► Domestic flows and flows to ROW.
National Transfer Accounts
Approach to Estimation
► National
Income Accounts and other
aggregate statistics are used as aggregate
controls
► Age profiles are based on nationally
representative surveys, e.g., income and
expenditure surveys, labor force surveys,
health expenditure surveys, etc.
► Common methodology documented on
www.ntaccounts.org
National Transfer Accounts
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.
National Transfer Accounts
Per Capita Lifecycle Deficit, Japan
2004, Survival Weighted
1.4
Relative to Yl(30-49)
1.2
1
Child LCD
15.1 years of
prime-adult
labor
Elderly LCD
10.5 years of
prime-adult
labor
0.8
0.6
0.4
0.2
0
0
10
20
30
40
50
60
70
80
90
Age
National Transfer Accounts
Note. US 1985-89 life table used for all countries.
LCD Children/Yl(30-49)
Tradeoff: Spending per Child and
Number of Children, 13 Countries
16
15
14
13
12
11
10
9
8
7
6
y = -7.7914x + 15.473
R2 = 0.6125
0.2
0.4
0.6
0.8
1
Child Dependency Ratio: N(0-19)/N(20-59)
National Transfer Accounts
1.2
LCD Children/Yl(30-49)
Tradeoff: Spending per Child and
Number of Children, 13 Countries
16
15
14
13
12
11
10
9
8
7
6
Jp
US
Tw
Ch
SK Th
Sw
Fr
Ur
CR
Indo
In
Ph
0.2
0.4
0.6
0.8
1
Child Dependency Ratio: N(0-19)/N(20-59)
National Transfer Accounts
1.2
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 will
have a larger effect on capital accumulation.
National Transfer Accounts
LCD Elderly/Yl(30-49)
Tradeoff: Spending per Elderly and
Number of Elderly, 13 Countries
12
11
10
9
8
7
6
5
4
3
2
y = 11.993x + 4.5285
R2 = 0.4266
0.1
0.15
0.2
0.25
0.3
0.35
0.4
Old-age Dependency Ratio: N(60+)/N(20-59)
National Transfer Accounts
0.45
0.5
LCD Elderly/Yl(30-49)
Tradeoff: Spending per Elderly and
Number of Elderly, 13 Countries
12
11
10
9
8
7
6
5
4
3
2
US
CR
Th
Ch
Ur
Jp
Fr
Tw
Sw
SK
Ph In
Indo
0.1
0.15
0.2
0.25
0.3
0.35
0.4
Old-age Dependency Ratio: N(60+)/N(20-59)
National Transfer Accounts
0.45
0.5
Issue 3. Support Systems for the
Elderly.
► How
do they differ across countries?
► Do Asian countries rely more on familial
transfers and Western countries more on
public transfers?
► Does the expansion of public systems crowd
saving as hypothesized by Feldstein?
► Or familial transfers?
National Transfer Accounts
Saving
Capital-based
transformation
Social welfare
transformation
Traditional
society?
Familial
Transfers
Old-Age Reallocation Systems
National Transfer Accounts
Public
Transfers
Saving
Mixed
Strategies
50-50 familial
and saving
50-50 saving
and public
50-50 familial
and public
Familial
Transfers
Old-Age Reallocation Systems
National Transfer Accounts
Public
Transfers
Saving
Public transfers
and familial
transfers are
substitutes.
Familial
Transfers
Old-Age Reallocation Systems
National Transfer Accounts
Public
Transfers
Saving
Feldstein: Public transfers to
the elderly crowd out saving.
Familial
Transfers
Old-Age Reallocation Systems
National Transfer Accounts
Public
Transfers
Old-age Reallocation System, Selected Countries.
100
0
US elderly rely on
asset-based reallocations
and public transfers.
25
75
Public
transfers (%)
US
50
50
Asset-based
(%)
75
25
100
0
100
National Transfer Accounts
75
50
Fam ily Transfers (%)
25
0
Old-age Reallocation System, Selected Countries.
100
Thai elderly rely on
asset-based
reallocations and on
familial transfers.
0
25
75
Public
transfers (%)
50
Thailand
50
Asset-based
(%)
75
25
100
0
100
National Transfer Accounts
75
50
Fam ily Transfers (%)
25
0
Old-age Reallocation System, Selected Countries.
100
0
25
75
Public
transfers (%)
Thailand
US
50
50
Asset-based
(%)
Taiwan has a
relatively
balanced 25
support system.
Costa Rica
75
Costa Rica and
Japan rely
heavily on
public transfers;
no familial
transfers.
Taiw an
Japan
100
0
100
National Transfer Accounts
75
50
Fam ily Transfers (%)
25
0
Conclusions
► Decline
in fertility may
 Lead to more consumption by children reducing
the effect on saving
 Lead to more spending on education for
children leading to second demographic
dividend due to human capital investment.
 Influence familial support systems in ways that
have not yet been explored.
National Transfer Accounts
Conclusions
► Aging
may lead to
 Larger per capita lifecycle deficit reinforcing the
effects of aging
 The economic effect will be some unknown
combination of the three:
►Increase
saving and economic growth
►Increase the size of public programs and budget
deficits; or
►Increase the burden on families which support the
elderly.
National Transfer Accounts
Conclusions
► The
support systems for the elderly are
varied and do not conform to simple
regional classifications.
► The elderly in Costa Rica and Japan are
relying on saving and public transfers. Have
public programs crowded out familial
transfers?
► In Taiwan and Thailand, the familial support
system is still important.
National Transfer Accounts
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 (ronlee), Co-Director
Mason, Andrew (amason), Co-Director
Auerbach, Alan (auerbach)
Miller, Tim (tmiller)
Lee, Sang-Hyop (leesang)
Donehower, Gretchen (gstockma)
Ebenstein, Avi (ebenstei)
Wongkaren, Turro (turro)
National Transfer Accounts
Takayesu, Ann (takayesa)
Boe, Carl (cboe)
Comelatto, Pablo (pabloc)
Sumida, Comfort (comfort)
Schiff, Eric (eric)
Stojanovic, Diana (diana)
Langer, Ellen (erlanger)
Chawla, Amonthep (beet)
Pajaron, Marjorie Cinco (pajaron)
Taiwan
Key Institution: The Institute of Economics,
Academia Sinica, Taipei, Taiwan.
Tung, An-Chi(actung), Country Leader
Lai, Mun Sim (Nicole)(munsim)
Liu, Paul K.C.(kliu)
Andrew Mason
Japan
Key Institutions: Nihon University Population Research
Institute and the Statistics Bureau of Japan, Tokyo, Japan.
Ogawa, Naohiro(ogawa), Country Leader
Matsukura, Rikiya(matukura)
Fukui, Takehiro(jstat)
Kondo, Makoto(kondo)
Akasaka, Katsuya(akasaka)
Nemoto, Kazuro(nemoto)
Makabe, Naomi(makabe)
Sato, Ryoko(rsato)
Ogawa, Maki(mogawa)
Murai, Minako(murai)
Obayashi, Senichi(obayashi)
Suzuki, Kosuke(Suzuki)
National Transfer Accounts
Australia
Key Institution: Australia National University
Jeromey Temple, Country Leader
Brazil
Turra, Cassio(cturra), Country Leader
Lanza Queiroz, Bernardo(lanza)
Renteria, Elisenda Perez(elisenda)
Chile
Key Institution: United Nations Economic Commission for
Latin America and the Carribean, Santiago, Chile
Bravo, Jorge(jbravo2), Country Leader
China
Key Institution: China Center for Economic Research,
Beijing, China.
Ling, Li(Lingli), Country Leader
Chen, Quilin(Chen)
National Transfer Accounts
France
Wolff, Francois-Charles(wolff), Country Leader
Bommier, Antoine(bommier)
Thailand
Key Institution: Economics Department, Thammasat University.
Phananiramai, Mathana(Mathana), Country Leader
Chawla, Amonthep (Beet)(amonthep)
Inthornon, Suntichai(Suntichai)
India
Key Institution: Institute for Social and Economic Change, Bangalore
Narayana, M.R.(narayana), Country Leader
Nanak Kakwani(kakwani)
Ladusingh, L.(ladusingh)
Mexico
Key Institution: Consejo Nacional de Población
Partida, Virgilio (virgilio), Country Leader
Mejía-Guevara, Iván(ivan)
National Transfer Accounts
Indonesia
Key Institution: Lembaga Demografi, University of Indonesia, Jakarta, Indonesia.
Maliki(maliki), Country Leader
Wiyono, Nur Hadi(nhwiyono)
Nazara, Suahasil(nazara)
Chotib(chotib)
Philippines
Key Institution: Philippine Institute for Development Studies.
Racelis, Rachel H.(Rachel), Country Leader
Salas, John Michael Ian S.(Salas)
Sweden
Key Institution: Institute for Future Studies, Stockholm, Sweden.
Lindh, Thomas(lindh), Country Leader
Johansson, Mats(Mats)
Forsell, Charlotte (charlotte)
National Transfer Accounts
Uruguay
Bucheli, Marisa(marisa), Country Leader
Furtado, Magdalena(furtado)
South Korea
An, Chong-Bum (cban), Country Leader
Chun, Young-Jun (yjchun)
Lim, Byung-In (billforest)
Kim, Cheol-Hee (Kimch)
Jeon, Seung-Hoon (jsh1105)
Gim, Eul-Sik (kuspia)
Seok, Sang-Hun (good)
Kim, Jae-Ho (ksud)
National Transfer Accounts
Austria
Key Institution: Vienna Institute of Demography
Fuernkranz-Prskawetz, Alexia (alexia), Country Leader
Sambt, Joze(joze)
Costa Rica
Key Institution: CCP, Universidad de Costa Rica
Rosero-Bixby, Luis(lrosero), Country Leader
Slovenia
Sambt, Joze(joze), Country Leader
National Transfer Accounts
United States
Key Institution: Center for the Economics and Demography of Aging
Lee, Ronald(ronlee), Country Leader
Miller, Tim(tmiller)
Ebenstein, Avi(ebenstei)
Boe, Carl(cboe)
Comelatto, Pablo(pabloc)
Donehower, Gretchen(gstockma)
Schiff, Eric(eric)
Langer, Ellen(erlanger)
National Transfer Accounts
The End
Support:
National Institutes of Health
NIA, R01-AG025488
NIA, R37-AG025247
National Transfer Accounts