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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

slide2
Support from NIA R37-AG11761, and will be supported by parallel NIA grants to Lee (Berkeley) and Mason (Hawaii).

Mason, Lee, Tung, Lai, and Miller

comparative international scope
Comparative International Scope
  • 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

slide4

Lifecycle Deficits—aggregate, not per capita

Mason, Lee, Tung, Lai, and Miller

slide5

TABLE 1 Resource Reallocation Across Age and Time

Mason, Lee, Tung, Lai, and Miller

theoretical roots in
Theoretical roots in
  • Samuelson overlapping generations
  • Gale
  • Willis
  • Lee

Mason, Lee, Tung, Lai, and Miller

project objectives
Project Objectives
  • 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
  • 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
  • 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
  • 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

slide11
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

preliminary results
Preliminary Results
  • 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

differences in lifecycle profiles are large
Differences in lifecycle profiles are large
  • 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

implication
Implication
  • 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

(1)

(2)

A = K + M

S = IK + IM

Mason, Lee, Tung, Lai, and Miller

slide19
These flow accounts can be integrated over age/time to generate corresponding stock accounts by age and in aggregate
    • Credit or debt
    • Capital
    • Transfer wealth/debt
  • The stocks from flows can sometimes be compared to direct measures of stocks as consistency check.

Mason, Lee, Tung, Lai, and Miller

slide20

Pub trans

Asset realloc

Inter vivos

bequests

Mason, Lee, Tung, Lai, and Miller

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
  • 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
  • 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
  • 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

slide31

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)

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)

Spending as Percent of GDP:

US

Spending as Percent of GDP:

France

Mason, Lee, Tung, Lai, and Miller

the end

The End

Mason, Lee, Tung, Lai, and Miller

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