Population aging and intergenerational transfers introducing age into national accounts
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Population Aging and Intergenerational Transfers: Introducing Age into National Accounts. Andrew Mason, University of Hawaii and East West Center Ronald Lee University of California at Berkeley An-Chi Tung , Academia Sinica, Taiwan Mun Sim Lai ,

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Population aging and intergenerational transfers introducing age into national accounts

Population Aging and Intergenerational Transfers: Introducing Age into National Accounts

Andrew Mason,

University of Hawaii and East West Center

Ronald Lee

University of California at Berkeley

An-Chi Tung,

Academia Sinica, Taiwan

Mun Sim Lai,

University of Hawaii and East West Center

Tim Miller,

University of California-Berkeley

Mason, Lee, Tung, Lai, and Miller


Mason, Lee, Tung, Lai, and Miller


Comparative international scope
Comparative International Scope parallel NIA grants to Lee (Berkeley) and Mason (Hawaii).

  • Main NIA funded project, Lee and Mason; teams for each country.

    • United States

    • Taiwan

    • Japan

    • Indonesia

    • Chile

    • Brazil

    • France

  • Additional countries funded by UNFPA, Ogawa at Nihon Univ.

    • China

    • India

    • Philippines

    • Thailand

  • Individuals in additional countries may participate with own funding

Mason, Lee, Tung, Lai, and Miller


Lifecycle Deficits—aggregate, not per capita parallel NIA grants to Lee (Berkeley) and Mason (Hawaii).

Mason, Lee, Tung, Lai, and Miller


TABLE 1 Resource Reallocation Across Age and Time parallel NIA grants to Lee (Berkeley) and Mason (Hawaii).

Mason, Lee, Tung, Lai, and Miller


Theoretical roots in
Theoretical roots in parallel NIA grants to Lee (Berkeley) and Mason (Hawaii).

  • Samuelson overlapping generations

  • Gale

  • Willis

  • Lee

Mason, Lee, Tung, Lai, and Miller


Project objectives
Project Objectives parallel NIA grants to Lee (Berkeley) and Mason (Hawaii).

  • Develop a National Transfer Account system that measures aggregate economic flows across age groups

    • Market and non-market transactions

    • Public and private (familial)

    • Asset reallocations and transfers

  • Estimate current and historical accounts

  • Projections

Mason, Lee, Tung, Lai, and Miller


Project objectives1
Project Objectives parallel NIA grants to Lee (Berkeley) and Mason (Hawaii).

  • Estimate current and historical accounts in varying social, economic, and political contexts

  • Develop projection models that can be used to assess the effects of economic change, aging, family systems, and public policy

  • Study the evolution of support systems

  • Study the macroeconomic consequences of aging and alternative support systems

Mason, Lee, Tung, Lai, and Miller


Additional objectives questions
Additional objectives, questions parallel NIA grants to Lee (Berkeley) and Mason (Hawaii).

  • Intergenerational equity as affected by changing public programs (pensions, privatization, health care, education, etc.)

  • Broad descriptive generalizations about directions of flows across age over time and social structure, through different channels.

  • Integrated picture of various channels through which children and the elderly derive resources – public and private transfers, and saving and investment.

  • Describe income reallocation through non-market mechanisms.

Mason, Lee, Tung, Lai, and Miller


Some estimation issues
Some Estimation Issues parallel NIA grants to Lee (Berkeley) and Mason (Hawaii).

  • Consumption age profile

    • Available estimation methods problematic

      (Engel, Rothbarth, collective models)

    • Education and health can be reliably estimated

  • Productivity age profile

    • Earnings may not reflect age variation in productivity

    • Seniority wage system in Japan, for example.

Mason, Lee, Tung, Lai, and Miller


Hope that description of patterns and changes will generate new stylized facts and provoke new questions

  • Next slide is an example: sudden and dramatic shift in the direction of public transfers in the US between 1940 and 1970.

Mason, Lee, Tung, Lai, and Miller


Mason, Lee, Tung, Lai, and Miller new stylized facts and provoke new questions


Preliminary results
Preliminary Results new stylized facts and provoke new questions

  • US in 2000 and Taiwan in 1998

  • Data

    • National Income and Product Accounts

    • Administrative records for public agencies

    • Household surveys of income, expenditure and assets

    • Population surveys and censuses

  • Methodology described in the paper

  • Method covers stocks and flows; here just look at flows

Mason, Lee, Tung, Lai, and Miller


Mason, Lee, Tung, Lai, and Miller new stylized facts and provoke new questions


Differences in lifecycle profiles are large
Differences in lifecycle profiles are large new stylized facts and provoke new questions

  • In Taiwan low labor income due to low labor force participation among women in their mid-40s and late 50s.

  • In US consumption of elderly high relative to non-elderly

    • Health spending by US elderly is very high

    • Non-health spending by US elderly is also much higher

Mason, Lee, Tung, Lai, and Miller


Mason, Lee, Tung, Lai, and Miller new stylized facts and provoke new questions


Implication
Implication new stylized facts and provoke new questions

  • Per capita lifecycle deficit of elderly is high in the US as compared to Taiwan

  • Given the age profile, aging would have a much larger effect on the size of the total deficit of US elderly

  • Thus, aging in the US would lead to a much greater increase in reallocations – assets, transfers, or both – than in Taiwan.

Mason, Lee, Tung, Lai, and Miller


Nta accounting identity
NTA Accounting Identity new stylized facts and provoke new questions

(1)

(2)

A = K + M

S = IK + IM

Mason, Lee, Tung, Lai, and Miller


Mason, Lee, Tung, Lai, and Miller


Pub trans generate corresponding stock accounts by age and in aggregate

Asset realloc

Inter vivos

bequests

Mason, Lee, Tung, Lai, and Miller


Mason, Lee, Tung, Lai, and Miller generate corresponding stock accounts by age and in aggregate


Mason, Lee, Tung, Lai, and Miller generate corresponding stock accounts by age and in aggregate


Mason, Lee, Tung, Lai, and Miller generate corresponding stock accounts by age and in aggregate


Mason, Lee, Tung, Lai, and Miller generate corresponding stock accounts by age and in aggregate


Are asset reallocations consistent with lifecycle saving hypothesis
Are Asset Reallocations Consistent with Lifecycle Saving Hypothesis?

  • Yes

    • Asset income important to the elderly

  • No

    • At working ages asset reallocations are positive

    • Older adults do not dis-save

  • Maybe

    • In Taiwan asset reallocations indirectly support consumption by elderly by financing familial transfers

Mason, Lee, Tung, Lai, and Miller



Observations
Observations Hypothesis?

  • Strong similarities between US and Taiwan

    • Importance of earnings

    • Magnitude of bequests

  • Asset reallocations are important

  • Heavy reliance on private transfers in Taiwan potential source of vulnerability to population aging.

Mason, Lee, Tung, Lai, and Miller


Limitations
Limitations Hypothesis?

  • Consumption age profile is hard to estimate

    • Available estimation methods problematic

      (Engel, Rothbarth, collective models)

  • Results are only one year analysis

    • Cannot determine age effect or cohort effect

  • Estimates are preliminary and methodologies are still being refined

Mason, Lee, Tung, Lai, and Miller


Another illustration of what can be done with historical depth and projections
Another illustration of what can be done with historical depth and projections

Mason, Lee, Tung, Lai, and Miller


Net present values of benefits minus taxes for generations
Net Present Values of Benefits minus Taxes for Generations depth and projections

  • Illustrate historical depth and projections for public sector

  • Includes only Public Educ, Social Sec, and Medicare

  • NPVs calculated based on

    • estimates and projections of age specific taxes paid and benefits received, 1850-2200

    • Discounted at 3% real

    • actual or projected survival

Mason, Lee, Tung, Lai, and Miller


Net Present Value at birth of expected life time benefits for Social Security, Medicare and Public Education as % of lifetime earnings, for generations born 1850 to 2090

Total

Mason, Lee, Tung, Lai, and Miller


Usa and france a comparison stephane zuber
USA and France: A Comparison (Stephane Zuber) for Social Security, Medicare and Public Education as % of lifetime earnings, for generations born 1850 to 2090

NPVs for the US

NPVs for France

Mason, Lee, Tung, Lai, and Miller


Usa and france accounting for the differences 1
USA and France: Accounting for the differences (1) for Social Security, Medicare and Public Education as % of lifetime earnings, for generations born 1850 to 2090

Spending as Percent of GDP:

US

Spending as Percent of GDP:

France

Mason, Lee, Tung, Lai, and Miller


The end

The End for Social Security, Medicare and Public Education as % of lifetime earnings, for generations born 1850 to 2090

Mason, Lee, Tung, Lai, and Miller


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