Macroeconomic Demography of Intergenerational Transfers

March 2005 Andrew Mason, East-West Center

Macroeconomic Demography of Intergenerational Transfers

Andrew Mason

University of Hawaii and East-West Center

Ronald Lee

University of California - Berkeley


Project Objectives

• Develop a system of aggregate accounts that measures economic flows across age groups

• National Transfer Flow Accounts – Market and non-market transactions– Public and private (familial)– Asset flows (capital, credit, land)– Transfers


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


Organization

Coordination and US EWC and CEDA

Japan NUPRI and Statistics Bureau

Indonesia LD, University of Indonesia

Taiwan Academia Sinica

France ENSANS

Chile ECLAC

Brazil Princeton

Funding National Institute on Aging


Lifecycle of labor income and consumption, Mean Values, Japan, 1999

0

50000

100000

150000

200000

250000

300000

350000

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

AgeSource: Statistics Bureau of Japan.

Consumption

Labor Income


Lifecycle of labor income and consumption, Aggregate Values, Japan, 1999

0

2000

4000

6000

8000

10000

12000

14000

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


Consumption

Labor Income


Lifecycle Deficit, Aggregate Values, Japan, 1999

-8000

-6000

-4000

-2000

0

2000

4000

6000


Deficits

Surplus


NT Flow Account, Aggregate. Taiwan, 1998 (NT$ billion), nominal

Age

Total 0-19 20-29 30-49 50-64 65+

Lifecycle Deficit 832 1,704 7 -1,329 25 424

Consumption 6,570 1,775 1,163 2,376 757 499

Private 5,290 1,244 951 2,040 640 414

Public 1,280 531 212 335 117 85

Less: Labor income 5,738 70 1,156 3,704 732 75


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.


Table 1. A Classification of NTA Reallocations.

Asset Reallocations

TransfersCapitalProperty and

Credit

PublicPublic infrastructure

Public debtStudent loans

Money

Public educationPublic health careUnfunded pension

plans

Private

HousingConsumer durablesFactories

FarmsInventories

Consumer creditInsurance

Land

Familial support of children and parentsBequestsCharitable contributions

Source: Adapted from Lee 1994.


NT Flow Account, Aggregate. Taiwan, 1998 (NT$ billion), nominal

Age

Total 0-19 20-29 30-49 50-64 65+

Lifecycle Reallocations 832 1,704 7 -1,329 25 424

Asset Reallocations 861 -5 -101 414 271 282

Income on Assets 2,456 4 175 1,539 528 211

Less: Saving 1,595 9 276 1,126 256 -72

Transfers -29 1,710 108 -1,742 -246 141

Public 2 611 51 -673 -103 116

Private -31 1,099 -18 -1,155 -52 95

Bequests 0 0 75 86 -91 -70


Components of Age ReallocationsAggregate values, Taiwan, 1998

-150

-100

-50

0

50

100

150

0 10 20 30 40 50 60 70 80 90+

Age

Re

all

oc

ati

on

s (

$N

T

bil

lio

ns

) .

Bequests Private Transfers Public Transfers Asset Reallocation

Total Inflow

Total Outflow


Components of Reallocations Mean Values, Taiwan, 1998

-400

-300

-200

-100

0

100

200

300

400

0 10 20 30 40 50 60 70 80 90+

Age

Reallo

cati

on

s (

$N

T 0

00s)

.


Total Inflow

Total Outflow


Components of ReallocationsAggregate Values, US, 2000

-150

-100

-50

0

50

100

150

0 10 20 30 40 50 60 70 80 90+

Age

Re

all

oc

ati

on

s (

$U

S

bil

lio

ns

) .


Total Inflow

Total Outflow


Components of Reallocations Mean values, US, 2000

-40000

-20000

0

20000

40000

60000

80000

0 10 20 30 40 50 60 70 80 90+

Age

Re

all

oc

ati

on

s (

$U

S)

.


Total Inflow

Total Outflow


Intra-household Net Transfers, Japan 1999, Taiwan 1998, and US 2000

-150.0

-100.0

-50.0

0.0

50.0

100.0

150.0

0 10 20 30 40 50 60 70 80Age

Ne

t T

ran

sfe

rs

Japan

Taiwan

US

Note: Net Transfers are expressed as a percent of per capita private consumption. US values include inter-household private transfers. Age groups w ith positive values are net recipients. Sources: Japan Statistics Bureau and Mason, Lee, Tung, and Lai 2005.


Finance of Consumption, Young Dependents (Age 0-19)

37.2 34.4

59.8 61.9

4.03.6

-20

0

20

40

60

80

100

120

USA (2000) Taiwan (1998)

Per

cen

tag

e o

f C

on

sum

pti

on

Public Transfers

Private Transfers

Work


Finance of Consumption, Old Dependents (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)Pe

rce

nta

ge

of

Co

ns

um

pti

on

Public Transfers

Private Transfers

Work

Bequests

Asset Reallocations


Concluding Comments

• Estimates are preliminary.

• Many technical issues remain.

• Early results are plausible and interesting.


The End


Lifecycle Deficit by Age, Japan, 1999 Actual and 1950 Age Distribution

-8000

-6000

-4000

-2000

0

2000

4000

6000

8000

10000

0 10 20 30 40 50 60 70 80 90

Age

1999 actual

1950 ages

Source: NSFIE 1999.


Lifecycle Deficit by Age, Japan, 1999 Actual and 2050 Age Distribution

-8000

-6000

-4000

-2000

0

2000

4000

6000

0 10 20 30 40 50 60 70 80 90

Age

1999 actual

2050 ages

Note. Values for 2050 based on UN low fertility projection and 1999 mean profiles.

Documents

Macroeconomic Demography of Intergenerational Transfers