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Richard Easterlin's Continuing Contributions to Intergenerational Transfers: A Macro-Perspective

This presentation explores the reallocation of income across age groups and the economic life cycle, highlighting the historical reversal of directions of flows. It also examines estimated age profiles of production and consumption and the various institutions and mechanisms that support these consumption patterns.

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Richard Easterlin's Continuing Contributions to Intergenerational Transfers: A Macro-Perspective

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  1. Presentation in Honor of Richard Easterlin’s Continuing Contributions: A Macro-Perspective on Intergenerational Transfers Ronald Lee UC Berkeley Material from NTA project, funded by NIA grants to Andy Mason and Ron Lee

  2. References – downloadable from http://www.schemearts.com/proj/nta/web/nta/show/Working%20Papers • Ronald Lee and Andrew Mason, “A Research Plan for the Macroeconomic Demography of Intergenerational Transfers”, January 2004. • Antoine Bommier, Ronald Lee, Timothy Miller, and Stephane Zuber, “Who wins and who loses? Public transfer accounts for US generations born 1850 to 2090”, December 2004. • Andrew Mason, Ronald Lee, An-Chi Tung, Mun-Sim Lai, and Tim Miller, forthcoming. “Population Aging and Intergenerational Transfers: Introducing Age into National Accounts”, Economics of Aging Series, David Wise, ed. NBER and University of Chicago Press. • Ronald Lee, Sang-Hyop Lee, and Andrew Mason. “Charting the Economic Life-Cycle”, November 2005 (under review)

  3. 1. Reallocation of income across age groups • Flows of income from individuals of one age to those of another age are a pervasive part of our everyday life, but from the point of view of national accounts they are largely invisible. • Some of these flows are attracting a lot of piecewise attention in terms of micro level motivations (investment in children, care for elderly parents, bequests, Social Security, Medicare) • Big picture is largely ignored.

  4. 2. The economic life cycle: Labor earnings and consumption per capita Output per person per year Labor earnings, yl(x) + + + + + + Consumption, c(x) • - - - • - - - - • - - • - - - - Age

  5. 3. Resource Reallocation Across Age and Time

  6. 4. A Fundamental Change: The Historical Reversal of Direction of Flows • Some production and consumption profiles have been estimated • Direction of flows is indicated by the population weighted average ages of consumption and production • See various articles for theory and mathematical framework • Here go straight to results

  7. 2050 +3 -2 United States [Lee & Miller] Lee, 2000, 2003 (see cv)

  8. 5. Estimated age profiles of production and consumption • These come from NTA project • Research by teams working on US and Taiwan • Looks simple; actually a great deal of analysis lies behind them.

  9. What institutions and mechanisms provide the flows that support these consumption patterns? • Source by age • Inter vivos familial transfers • bequests • Public transfers • Through assets (credit and capital)

  10. Source: See Lee, Lee and Mason (2005).

  11. Source: See Lee, Lee and Mason (2005).

  12. Mason, Lee, Tung, Mun-Sim Lai, and Miller (2005)

  13. Mason, Lee, Tung, Mun-Sim Lai, and Miller (2005)

  14. How the elderly fund consumption Mason, Lee, TungMun-Sim Lai, and Miller (2005)

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

  16. Net Present Values of Benefits minus Taxes for Generations • 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

  17. 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 See Bommier, Lee, Miller and Zuber

  18. USA and France: A Comparison (see Stephane Zuber) NPVs for the US NPVs for France

  19. USA and France: Accounting for the differences (1) seeStephane Zuber Spending as Percent of GDP: US Spending as Percent of GDP: France

  20. The End

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