april 1, 20061 presentation in honor of richard easterlin’s continuing contributions: a macro-...
TRANSCRIPT
April 1, 2006 1
Presentation in Honor of Richard Easterlin’s Continuing
Contributions: A Macro-Perspective on Intergenerational
TransfersRonald Lee
UC BerkeleyMaterial from NTA project, funded by NIA
grants to Andy Mason and Ron Lee
April 1, 2006 3
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)
April 1, 2006 4
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.
April 1, 2006 5
2. The economic life cycle: Labor earnings and consumption per capita
Age
Output per person per year
Labor earnings, yl(x)
Consumption, c(x)
+ + ++ + +
-- - -
-- - - -
-- -
-- - - -
April 1, 2006 6
3. Resource Reallocation Across Age and Time Form of Reallocation
Family
Institution
Market Public Sector
Capital HouseCarConsumer DurablesInventoriesEducation
Factories Inventories Farms
Social Infrastructure(Hospitals, Roads,Airports, Govt. Bldgs)
Transfers Child RearingCollege CostsGiftsBequestsHelp to Elderly
Government Debt Public EducationMedicaid, MedicareSocial SecurityFood StampsAFDC
Borrowing/Lending
Familial Loans"Transfers" with a quid pro quo
Credit Markets (mortgages, credit cards, bond issues)
Government Loans
April 1, 2006 7
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
April 1, 2006 8
United States [Lee & Miller]-2
+3 2050
Lee, 2000, 2003 (see cv)
April 1, 2006 9
April 1, 2006 10
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.
April 1, 2006 11
Figure 2A. Per Capita Labor Income and Consumption, Taiwan (1977)
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90
AgeSource: See Lee, Lee and Mason (2005) for methods and data sources for these estimates.
April 1, 2006 12
Figure 2B. Per Capita Labor Income and Consumption, US (2000)
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90
Age
Source: See Lee, Lee and Mason (2005) for methods and data sources for these estimates.
April 1, 2006 13
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)
April 1, 2006 14Source: See Lee, Lee and Mason (2005).
April 1, 2006 15Source: See Lee, Lee and Mason (2005).
April 1, 2006 16
Figure 5b. Components of Individual Age Reallocations, Taiwan, 1998
-400
-300-200
-100
0
100200
300
400
500600
700
0 10 20 30 40 50 60 70 80 90+
Age
Rea
llo
cati
on
s ($
NT
th
ou
san
ds)
.
Bequests Inter Vivos Transfers Public Transfers Asset Reallocation
Total Inflows
Total Outflows
Mason, Lee, Tung, Mun-Sim Lai, and Miller (2005)
April 1, 2006 17
Figure 6b. Components of Individual Age Reallocations, US, 2000
-40
-30
-20
-10
0
10
20
30
40
50
60
70
0 10 20 30 40 50 60 70 80 90+
Age
Rea
llo
cati
on
s ($
US
th
ou
san
ds)
.
Bequests Inter Vivos Transfers Public Transfers Asset Reallocation
Total Inflows
Total Outflows
Mason, Lee, Tung, Mun-Sim Lai, and Miller (2005)
April 1, 2006 18
How the elderly fund consumptionFigure 1. How the Elderly Finance Consumption in the US and
Taiwan (Age 65+)
35.323.3
61.842.5
-14.6 -14.1
4.4 33.2
15.113.1
-40
-20
0
20
40
60
80
100
120
140
USA (2000) Taiwan (1998)Perc
en
tag
e o
f C
on
su
mp
tio
n .
Public Transfers
Inter Vivos Transfers
Work
Bequests
Asset Reallocations
Mason, Lee, TungMun-Sim Lai, and Miller (2005)
April 1, 2006 19
Another illustration of what can be done with historical depth and
projections
April 1, 2006 20
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
April 1, 2006 21
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
April 1, 2006 22
USA and France: A Comparison (see Stephane Zuber)
-20
-15
-10
-5
0
5
10
15
Year of Birth
Education
Public Pensions + Health Benefits
Combined
-20
-15
-10
-5
0
5
10
15
Ye ar of B irth
Education
Public Pensions + Health Benefits
Combined
NPVs for the US
NPVs for France
April 1, 2006 23
USA and France: Accounting for the differences (1) seeStephane Zuber
0
5
10
15
20
25
30
35
Year
Education
Social Security
Medicare
Spending as Percent of GDP:US
0
5
10
15
20
25
30
35
Year
Education
Public Pensions
Health Benefits
Spending as Percent of GDP:France
April 1, 2006 24
The End