Population Aging and Intergenerational Transfers: Introducing Age into National Accounts Andrew Mason, University of Hawaii and East West Center An-Chi Tung, Academia Sinica, Taiwan Mun Sim Lai, University of Hawaii and East West Center Tim Miller, University of California-Berkeley Mason et al.
Lifecycle Deficits Mason et al.
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 et al.
Issues • Why do support systems vary over time and space? • What are the macroeconomic consequences of population aging? • How do the effects of aging vary with the support systems in place? • What are the implications of public reform? Changes in familial support systems? Mason et al.
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 in the paper Mason et al.
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 et al.
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 et al.
Estimated Reallocation Components • Asset reallocations • Inflows: net asset income • Outflows: net saving • Public transfers • Education, health care, public pensions • Other public allocated using per capita allocation • Private transfers • Inter vivos transfers, including inter- and intra-household transfers • Bequests Mason et al.
NTA Accounting Identity (1) (2) Mason et al.
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 et al.
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 et al.
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 et al.
The End Mason et al.