n ational t ransfer a ccounts low fertility and intergenerational transfers andrew mason university...

NNational ational TTransfer ransfer AAccountsccounts

Low Fertility and Low Fertility and Intergenerational Transfers Intergenerational Transfers

Andrew MasonAndrew Mason

University of Hawaii – ManoaUniversity of Hawaii – Manoa

East-West CenterEast-West Center

Symposium on “Equality without Symposium on “Equality without Children?” Institute for Future Studies, Children?” Institute for Future Studies, Stockholm, 7-8 April, 2008Stockholm, 7-8 April, 2008

National Transfer Accounts

MotivationMotivation

►Three features of the economy determine Three features of the economy determine the magnitude, the direction, and the magnitude, the direction, and economic implications of intergenerational economic implications of intergenerational transferstransfers

►Economic lifecycleEconomic lifecycle►Population age structure Population age structure ►Systems for shifting resources across ageSystems for shifting resources across age

SavingSaving Public transfer programsPublic transfer programs Familial Support systemsFamilial Support systems


OutlineOutline

I.I. Basic ConceptsBasic Concepts

II.II. National Transfer Account ProjectNational Transfer Account Project

III.III. Three Important IssuesThree Important Issues► Low fertility and flows to childrenLow fertility and flows to children► Aging and flows to the elderlyAging and flows to the elderly► Support systems for the elderlySupport systems for the elderly


The Economic Lifecycle The Economic Lifecycle

0

0.2

0.4

0.6

0.8

1

1.2

0 6 12 18 24 30 36 42 48 54 60 66 72 78 84 90

Rel

ativ

e to

lab

or

inco

me(

30-4

9)

Consumption

Labor Income

Note: Based on estimates for Costa Rica, Indonesia, Taiwan, and Thailand.


Lifecycle combined with Lifecycle combined with population determines the population determines the magnitude and direction of IG magnitude and direction of IG flowsflows

0

200

400

600

800

1000

1200

1400

1600

0

1000

2000

3000

4000

5000

6000

0-4

10-

14

20-2

4

30-3

4

40-4

4

50-5

4

60-6

4

70-7

4

80-8

4

90-9

410

0+

Young Population Old Population

Yl

C

Yl

C

Note: Uses per capita consumption profiles shown above.


Aggregate LC creates the Aggregate LC creates the demand for inter-age flows or demand for inter-age flows or reallocations.reallocations.

Japan Consumption and Labor Income, 2004

0

2,000

4,000

6,000

8,000

10,000

12,000

0 10 20 30 40 50 60 70 80 90

Yen (billions)

Source: Ogawa et al. 2007.

Labor Income

Consumption

Japan Lifecycle Deficit, 2004

-5000

-4000

-3000

-2000

-1000

0

1000

2000

3000

4000

5000

0 10 20 30 40 50 60 70 80 90

Yen (billions)


Inter-age Transfers

-5000

-4000

-3000

-2000

-1000

0

1000

2000

3000

4000

5000

0 10 20 30 40 50 60 70 80 90

Yen (billions)

GovernmentsFamilies

Charitable Organizations


Inter-age Asset-based Flows

-5000

-4000

-3000

-2000

-1000

0

1000

2000

3000

4000

5000

0 10 20 30 40 50 60 70 80 90

Yen (billions)

Accumulation anddis-accumulation

of assets

Accumulation anddis-accumulation

of debt


II. National Transfer AccountsII. National Transfer Accounts

► Objective: Objective: Develop and apply a comprehensive system of accounts Develop and apply a comprehensive system of accounts

that measures economic flows across age groups in a that measures economic flows across age groups in a manner consistent with the System of National Accounts. manner consistent with the System of National Accounts.

► Conceptual foundation: Conceptual foundation: Lee (1994) but also Samuelson (1958), Diamond (1965), Lee (1994) but also Samuelson (1958), Diamond (1965),

and Willis (1988).and Willis (1988).► Organization: Organization:

Collaboration between EWC/UH and UC-Berkeley. Core Collaboration between EWC/UH and UC-Berkeley. Core funding from NIA; NUPRI MEXT Academic Frontier Project, funding from NIA; NUPRI MEXT Academic Frontier Project, Government ofGovernment of Japan. Sub-projects supported by UNFPA, Japan. Sub-projects supported by UNFPA, IDRC, MacArthur Foundation and others.IDRC, MacArthur Foundation and others.

► Website: www.ntaccounts.orgWebsite: www.ntaccounts.org


Participating CountriesParticipating Countries

Asia/OceaniaAsia/OceaniaChinaChina

IndiaIndia

IndonesiaIndonesia

JapanJapan

Korea, S.Korea, S.

PhilippinesPhilippines

TaiwanTaiwan

ThailandThailand

AustraliaAustralia

EuropeEuropeAustriaAustria

FinlandFinland

FranceFrance

GermanyGermany

HungaryHungary

SloveniaSlovenia

SpainSpain

SwedenSweden

N AmericaN AmericaUnited StatesUnited States

Latin AmericaLatin AmericaBrazilBrazil

ChileChile

Costa RicaCosta Rica

MexicoMexico

UruguayUruguay

AfricaAfricaKenyaKenya

NigeriaNigeria


The Flow Account IdentityThe Flow Account Identity

► InflowsInflows Labor IncomeLabor Income Asset IncomeAsset Income Transfer InflowsTransfer Inflows

► OutflowsOutflows ConsumptionConsumption SavingSaving Transfer OutflowsTransfer Outflows

Inflows Outflows

( ) ( ) ( ) ( ) ( ) ( )l aY a Y a a C a S a a

Lifecycle Deficit Asset-based Reallocations Net Transfers

Age Reallocations

( ) ( ) ( ) ( ) ( ) ( )l aC a Y a Y a S a a a


Flow Account DetailsFlow Account Details

► Consumption: public and private for health, Consumption: public and private for health, education, housing, and other.education, housing, and other.

► Public transfers: in-kind (health, education, Public transfers: in-kind (health, education, other) and cash (pensions and other).other) and cash (pensions and other).

► Private transfers: intra-household for Private transfers: intra-household for health, education, housing, and all other; health, education, housing, and all other; inter-household for other. inter-household for other.

► Asset-based reallocations: Public and Asset-based reallocations: Public and private investment; public and private private investment; public and private credit/debt.credit/debt.

► Flows to ROW: remittances, foreign Flows to ROW: remittances, foreign investment, foreign aid.investment, foreign aid.


Approach to EstimationApproach to Estimation

►National Income Accounts and other National Income Accounts and other aggregate statistics are used as aggregate statistics are used as aggregate controlsaggregate controls

►Age profiles are estimated using Age profiles are estimated using nationally representative surveys, e.g., nationally representative surveys, e.g., income and expenditure surveys, labor income and expenditure surveys, labor force surveys, health expenditure force surveys, health expenditure surveys, etc. surveys, etc.

►Common methodology documented on Common methodology documented on www.ntaccounts.orgwww.ntaccounts.org


Issue 1: Transfers to ChildrenIssue 1: Transfers to Children

►Does the lifecycle deficit and transfers Does the lifecycle deficit and transfers per child increase as the number of per child increase as the number of children declines? children declines? Becker quality-quantity tradeoffBecker quality-quantity tradeoff If so, the decline in fertility may have a If so, the decline in fertility may have a

smaller effect on aggregate consumption smaller effect on aggregate consumption and saving. and saving.

If so, the decline in numbers may be offset If so, the decline in numbers may be offset by an increase in human capital and, by an increase in human capital and, hence, productivity. hence, productivity.


Per Capita Lifecycle Deficit, Per Capita Lifecycle Deficit, Japan 2004, Survival WeightedJapan 2004, Survival Weighted

0

0.2

0.4

0.6

0.8

1

1.2

1.4

0 10 20 30 40 50 60 70 80 90

Age

Rel

ativ

e to

Yl(

30-4

9)

Note. US 1985-89 life table used for all countries.


Tradeoff: Transfers to Children and Tradeoff: Transfers to Children and Number of Children, 13 CountriesNumber of Children, 13 Countries

y = -7.7914x + 15.473

R2 = 0.6125

6789

10111213141516

0.2 0.4 0.6 0.8 1 1.2

Child Dependency Ratio: N(0-19)/N(20-59)

LC

D C

hil

dre

n/Y

l(30

-49)


Tradeoff: Transfers to Children and Tradeoff: Transfers to Children and Number of Children, 13 CountriesNumber of Children, 13 Countries

6789

10111213141516

0.2 0.4 0.6 0.8 1 1.2

Child Dependency Ratio: N(0-19)/N(20-59)

LC

D C

hil

dre

n/Y

l(30

-49)

Jp

US ChTwSK Th

SwFr

IndoUrCR In

Ph


Issue 2: Lifecycle Deficit, Issue 2: Lifecycle Deficit, ElderlyElderly►Does the lifecycle deficit per elderly Does the lifecycle deficit per elderly

increase with the share of the elderly? increase with the share of the elderly? Preston and others argue yes – political Preston and others argue yes – political

power. power. If so, the rise in the old-age population If so, the rise in the old-age population

may lead to a greater fiscal burden. may lead to a greater fiscal burden.


Tradeoff: LC Deficit of the Elderly Tradeoff: LC Deficit of the Elderly and Number of Elderly, 13 Countriesand Number of Elderly, 13 Countries

y = 11.993x + 4.5285

R2 = 0.4266

23456789

101112

0.1 0.15 0.2 0.25 0.3 0.35 0.4 0.45 0.5

Old-age Dependency Ratio: N(60+)/N(20-59)

LC

D E

lder

ly/Y

l(30

-49)


Tradeoff: LC Deficit of the Elderly Tradeoff: LC Deficit of the Elderly and Number of Elderly, 13 Countriesand Number of Elderly, 13 Countries

23456789

101112

0.1 0.15 0.2 0.25 0.3 0.35 0.4 0.45 0.5

Old-age Dependency Ratio: N(60+)/N(20-59)

LC

D E

lder

ly/Y

l(30

-49)

UrJpUS

Fr

Sw

CRTw

ThCh

SK

Ph InIndo


Issue 3. Support Systems for Issue 3. Support Systems for the Elderly. the Elderly. ►How do they differ across countries?How do they differ across countries?►Do Asian countries rely more on familial Do Asian countries rely more on familial

transfers and Western and Latin transfers and Western and Latin American countries more on public American countries more on public transfers? transfers?

►Does the expansion of public systems Does the expansion of public systems crowd saving as hypothesized by crowd saving as hypothesized by Feldstein?Feldstein?

►Or familial transfers? Or familial transfers?


Old-age Reallocation System, Selected Countries.

0

50

75

100

75

75

50

50

25

25

0

0

25

100

100

Asset-based (%)

Public transfers (%)

Family Transfers (%)

US

Thailand

Costa Rica

JapanTaiw an

Korea

Familial transfers equally important in Thailand, Korea, and Taiwan (36-

40%). Net familial transfers near zero in US, CR, and J. Large

public transfers in CR and J. More

reliance on assets in CR & US.

Net public transfers to elderly are zero in

Thailand; about 25% in Taiwan and Korea.


Old-age Reallocation System, Selected Countries.

0

50

75

100

75

75

50

50

25

25

0

0

25

100

100

Asset-based (%)



US

Thailand

Costa Rica

JapanTaiw an

Korea

Reliance on assets in old-age


Old-age Reallocation System, 65 to 85-year-olds, Taiwan, 2003.

0

50

75

100

75

75

50

50

25

25

0

0

25

100

100

Asset-based (%)



65-year-olds67% assets, 2%

public, 32% private

85-year-olds23% assets, 39%

public, 38% private


Old-age Reallocation System, Costa Rica 2004

0

50

75

100

75

75

50

50

25

25

0

0

25

100

100

Asset-based (%)



85


Old-age Reallocation System, Uruguay 1994

0

50

75

100

75

75

50

50

25

25

0

0

25

100

100

Asset-based (%)



85


Old-age Reallocation System, 65-85-year-olds, Taiwan, 2003.

0

50

75

100

75

75

50

50

25

25

0

0

25

100

100

Asset-based (%)



From ages 65 to 80, familial share varies little. Public rising and asset-based declining.

After 80 familial share is rising

and asset-based

declining.

Old-age Reallocation SystemFinland, 2003, 65-85 and Philippines, 1999, 65-80.

0

50

75

100

75

75

50

50

25

25

0

0

25

100

100

Asset-based (%)



Finland 65

Finland 85

Philippines 80

Philippines 72


Old-age Reallocation System, 75-year-olds, Taiwan, 1977-2003.

0

50

75

100

75

75

50

50

25

25

0

0

25

100

100

Asset-based (%)



1995-2003

1977-1994

Asset-based reallocations and public transfers have increased

over time; familial transfers have declined

precipitously.

NHI began in 1995; net public

transfers increased.


Summary of Support Summary of Support Systems Systems ► Estimates are preliminaryEstimates are preliminary► Old-age support systemsOld-age support systems

Show wide variationShow wide variation Vary with the age of the elderlyVary with the age of the elderly Are changing rapidlyAre changing rapidly

► Familial support system for the elderlyFamilial support system for the elderly Small in high-income countries (West and Japan)Small in high-income countries (West and Japan) Upward in rest of Asia, but declining over timeUpward in rest of Asia, but declining over time Downward in Latin AmericaDownward in Latin America


Warnings!Warnings!

►NIPA and NTA are incompleteNIPA and NTA are incomplete TimeTime EnvironmentEnvironment

►Aggregate data vary in quality and Aggregate data vary in quality and coveragecoverage

► Imputing values to individuals based Imputing values to individuals based on values for households is difficulton values for households is difficult


Final RemarksFinal Remarks

►Economic resources shifted across age Economic resources shifted across age are enormous.are enormous.

► Important in many respectsImportant in many respects Accumulation of human and physical Accumulation of human and physical

capitalcapital Generational equityGenerational equity Economic growthEconomic growth Externalities to childbearingExternalities to childbearing

►Measuring and studying these flows is Measuring and studying these flows is difficult but essential. difficult but essential.


Support for this project has been provided Support for this project has been provided by:by:

• National Institute on Aging: R37-AG025488 and R01-National Institute on Aging: R37-AG025488 and R01-AG025247AG025247

• NUPRI MEXT Academic Frontier Project, Government of NUPRI MEXT Academic Frontier Project, Government of JapanJapan

• John D. and Catherine T. MacArthur Foundation John D. and Catherine T. MacArthur Foundation

• International Development Research Center (IDRC)International Development Research Center (IDRC)

• United Nations Population Fund (UNFPA)United Nations Population Fund (UNFPA)


The National Transfer Accounts project is a collaborative effort of East-West Center, Honolulu

and Center for the Economics and

Demography of Aging, University of California - Berkeley

Lee, Ronald, Co-DirectorLee, Ronald, Co-Director

Mason, Andrew , Co-Director Mason, Andrew , Co-Director

Auerbach, Alan Auerbach, Alan

Miller, Tim Miller, Tim

Lee, Sang-Hyop Lee, Sang-Hyop

Donehower, Gretchen Donehower, Gretchen

Ebenstein, Avi Ebenstein, Avi

Wongkaren, TurroWongkaren, Turro

Takayesu, Ann Takayesu, Ann

Boe, Carl Boe, Carl

Comelatto, Pablo Comelatto, Pablo

Sumida, Comfort Sumida, Comfort

Schiff, Eric Schiff, Eric

Stojanovic, Diana Stojanovic, Diana

Langer, EllenLanger, Ellen

Chawla, AmonthepChawla, Amonthep

Pajaron, Marjorie CincoPajaron, Marjorie Cinco


Japan Key Institutions: Nihon University Population Research

Institute and the Statistics Bureau of Japan, Tokyo, Japan. Ogawa, Naohiro, Country Leader

Matsukura, Rikiya Maliki

Obayashi, Senichi Kondo, Makoto Fukui, Takehiro

Ihara, HajimeSuzuki, Kosuke

Akasaka, Katsuya Moriki, Yoshie

Makabe, Naomi Ogawa, Maki


AustraliaKey Institution: Australia National University

Jeromey Temple, Country LeaderBrazil

Turra, Cassio, Country Leader Lanza Queiroz, BernardoRenteria, Elisenda Perez

Chile Key Institution: United Nations Economic Commission for

Latin America and the Carribean, Santiago, Chile Bravo, JorgeMauricio Holz


Taiwan Key Institution: The Institute of

Economics, Academia Sinica, Taipei, Taiwan.

Tung, An-Chi, Country LeaderLai, Mun Sim (Nicole)

Liu, Paul K.C.Andrew Mason

China Key Institution: China Center for

Economic Research, Beijing, China.

Ling, Li, Country Leader Chen, Quilin

Jiang, Yu


France Wolff, Francois-Charles, Country Leader

Bommier, Antoine Thailand

Key Institution: Economics Department, Thammasat University. Phananiramai, Mathana, Country Leader

Chawla, Amonthep (Beet) Inthornon, Suntichai

India Key Institution: Institute for Social and Economic Change, Bangalore

Narayana, M.R., Country Leader Ladusingh, L.

MexicoKey Institution: Consejo Nacional de Población

Partida, Virgilio, Country Leader Mejía-Guevara, Iván


Indonesia Key Institution: Lembaga Demografi, University of Indonesia, Jakarta, Indonesia.

Maliki, Country Leader Wiyono, Nur Hadi Nazara, Suahasil

Chotib Philippines

Key Institution: Philippine Institute for Development Studies. Racelis, Rachel H., Country Leader

Salas, John Michael Ian S.Pajaron, Marjorie Cinco

Sweden Key Institution: Institute for Future Studies, Stockholm, Sweden.

Lindh, Thomas, Country Leader Johansson, Mats Forsell, Charlotte


Uruguay Bucheli, Marisa, Country Leader

Furtado, Magdalena Rodrigo Ceni

Cecilia Rodriguez South Korea

An, Chong-Bum , Country LeaderChun, Young-JunLim, Byung-In

Kim, Cheol-Hee Jeon, Seung-Hoon

Gim, Eul-Sik Seok, Sang-Hun

Kim, Jae-Ho


Austria Key Institution: Vienna Institute of Demography Fuernkranz-Prskawetz, Alexia, Country Leader

Sambt, Joze Costa Rica

Key Institution: CCP, Universidad de Costa Rica Rosero-Bixby, Luis, Country Leader

Maria Paola Zuniga Slovenia

Sambt, Joze, Country Leader Hungary

Key Institution: TARKI Social Research InstituteGal, Robert

Medgyesi, Marton Finland

Key institutions: The Finnish Center for Pensions And the Finnish Pension Alliance

Vanne, ReijoGröhn, Jukka

Vaittinen, Risto


United States Key Institution: Center for the Economics and Demography of Aging

Lee, Ronald, Country LeaderMiller, Tim

Ebenstein, Avi Boe, Carl

Comelatto, Pablo Donehower, Gretchen

Schiff, EricLanger, Ellen


Kenya Mwabu, Germano

NigeriaSoyibo, Adedoyin


Thank youThank you

n ational t ransfer a ccounts low fertility and intergenerational transfers andrew mason university...

Documents

n ational t ransfer

labor income consumption

ccounts lifecycle

ccounts accumulation

elderly slide

public transfers

economic flows

ccounts approach