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


Population aging and intergenerational transfers introducing age into national accounts

  • 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


Population aging and intergenerational transfers introducing age into national accounts

Lifecycle Deficits—aggregate, not per capita

Mason, Lee, Tung, Lai, and Miller


Population aging and intergenerational transfers introducing age into national accounts

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


Population aging and intergenerational transfers introducing age into national accounts

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


Population aging and intergenerational transfers introducing age into national accounts

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


Population aging and intergenerational transfers introducing age into national accounts

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


Population aging and intergenerational transfers introducing age into national accounts

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


Population aging and intergenerational transfers introducing age into national accounts

  • 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


Population aging and intergenerational transfers introducing age into national accounts

Pub trans

Asset realloc

Inter vivos

bequests

Mason, Lee, Tung, Lai, and Miller


Population aging and intergenerational transfers introducing age into national accounts

Mason, Lee, Tung, Lai, and Miller


Population aging and intergenerational transfers introducing age into national accounts

Mason, Lee, Tung, Lai, and Miller


Population aging and intergenerational transfers introducing age into national accounts

Mason, Lee, Tung, Lai, and Miller


Population aging and intergenerational transfers introducing age into national accounts

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


Population aging and intergenerational transfers introducing age into national accounts

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


Population aging and intergenerational transfers introducing age into national accounts

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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