1. N ational T ransfer A ccounts Low Fertility and Intergenerational Transfers Andrew Mason University of Hawaii – Manoa East-West Center Symposium on Equality without Children? Institute for Future Studies, Stockholm, 7-8 April, 2008

2. N ational T ransfer A ccounts Motivation Three features of the economy determine the magnitude, the direction, and economic implications of intergenerational transfers Three features of the economy determine the magnitude, the direction, and economic implications of intergenerational transfers Economic lifecycle Economic lifecycle Population age structure Population age structure Systems for shifting resources across age Systems for shifting resources across age Saving Saving Public transfer programs Public transfer programs Familial Support systems Familial Support systems

3. N ational T ransfer A ccounts Outline I. Basic Concepts II. National Transfer Account Project III. Three Important Issues Low fertility and flows to children Low fertility and flows to children Aging and flows to the elderly Aging and flows to the elderly Support systems for the elderly Support systems for the elderly

4. N ational T ransfer A ccounts The Economic Lifecycle Consumption Labor Income Note: Based on estimates for Costa Rica, Indonesia, Taiwan, and Thailand.

5. N ational T ransfer A ccounts Lifecycle combined with population determines the magnitude and direction of IG flows Young Population Old Population Yl C C Note: Uses per capita consumption profiles shown above.

6. N ational T ransfer A ccounts Aggregate LC creates the demand for inter-age flows or reallocations. Source: Ogawa et al. 2007. Labor Income Consumption

7. N ational T ransfer A ccounts Governments Families Charitable Organizations

8. N ational T ransfer A ccounts Accumulation and dis-accumulation of assets Accumulation and dis-accumulation of debt

9. N ational T ransfer A ccounts II. National Transfer Accounts Objective: Objective: Develop and apply a comprehensive system of accounts that measures economic flows across age groups in a manner consistent with the System of National Accounts. Develop and apply a comprehensive system of accounts that measures economic flows across age groups in a manner consistent with the System of National Accounts. Conceptual foundation: Conceptual foundation: Lee (1994) but also Samuelson (1958), Diamond (1965), and Willis (1988). Lee (1994) but also Samuelson (1958), Diamond (1965), and Willis (1988). Organization: Organization: Collaboration between EWC/UH and UC-Berkeley. Core funding from NIA; NUPRI MEXT Academic Frontier Project, Government of Japan. Sub-projects supported by UNFPA, IDRC, MacArthur Foundation and others. Collaboration between EWC/UH and UC-Berkeley. Core funding from NIA; NUPRI MEXT Academic Frontier Project, Government of Japan. Sub-projects supported by UNFPA, IDRC, MacArthur Foundation and others. Website: www.ntaccounts.org Website: www.ntaccounts.org

10. N ational T ransfer A ccounts Participating Countries Asia/OceaniaChinaIndiaIndonesiaJapan Korea, S. PhilippinesTaiwanThailandAustraliaEuropeAustriaFinlandFranceGermanyHungarySloveniaSpainSweden N America United States Latin America BrazilChile Costa Rica MexicoUruguayAfricaKenyaNigeria

11. N ational T ransfer A ccounts The Flow Account Identity Inflows Inflows Labor Income Labor Income Asset Income Asset Income Transfer Inflows Transfer Inflows Outflows Outflows Consumption Consumption Saving Saving Transfer Outflows Transfer Outflows

12. N ational T ransfer A ccounts Flow Account Details Consumption: public and private for health, education, housing, and other. Consumption: public and private for health, education, housing, and other. Public transfers: in-kind (health, education, other) and cash (pensions and other). Public transfers: in-kind (health, education, other) and cash (pensions and other). Private transfers: intra-household for health, education, housing, and all other; inter-household for other. Private transfers: intra-household for health, education, housing, and all other; inter-household for other. Asset-based reallocations: Public and private investment; public and private credit/debt. Asset-based reallocations: Public and private investment; public and private credit/debt. Flows to ROW: remittances, foreign investment, foreign aid. Flows to ROW: remittances, foreign investment, foreign aid.

13. N ational T ransfer A ccounts Approach to Estimation National Income Accounts and other aggregate statistics are used as aggregate controls National Income Accounts and other aggregate statistics are used as aggregate controls Age profiles are estimated using nationally representative surveys, e.g., income and expenditure surveys, labor force surveys, health expenditure surveys, etc. Age profiles are estimated using nationally representative surveys, e.g., income and expenditure surveys, labor force surveys, health expenditure surveys, etc. Common methodology documented on www.ntaccounts.org Common methodology documented on www.ntaccounts.org

14. N ational T ransfer A ccounts Issue 1: Transfers to Children Does the lifecycle deficit and transfers per child increase as the number of children declines? Does the lifecycle deficit and transfers per child increase as the number of children declines? Becker quality-quantity tradeoff Becker quality-quantity tradeoff If so, the decline in fertility may have a smaller effect on aggregate consumption and saving. If so, the decline in fertility may have a smaller effect on aggregate consumption and saving. If so, the decline in numbers may be offset by an increase in human capital and, hence, productivity. If so, the decline in numbers may be offset by an increase in human capital and, hence, productivity.

15. N ational T ransfer A ccounts Per Capita Lifecycle Deficit, Japan 2004, Survival Weighted Note. US 1985-89 life table used for all countries.

16. N ational T ransfer A ccounts Tradeoff: Transfers to Children and Number of Children, 13 Countries

17. N ational T ransfer A ccounts Tradeoff: Transfers to Children and Number of Children, 13 Countries Jp US Ch Tw SK Th Sw Fr Indo Ur CR In Ph

18. N ational T ransfer A ccounts Issue 2: Lifecycle Deficit, Elderly Does the lifecycle deficit per elderly increase with the share of the elderly? Does the lifecycle deficit per elderly increase with the share of the elderly? Preston and others argue yes – political power. Preston and others argue yes – political power. If so, the rise in the old-age population may lead to a greater fiscal burden. If so, the rise in the old-age population may lead to a greater fiscal burden.

19. N ational T ransfer A ccounts Tradeoff: LC Deficit of the Elderly and Number of Elderly, 13 Countries

20. N ational T ransfer A ccounts Tradeoff: LC Deficit of the Elderly and Number of Elderly, 13 Countries Ur Jp US Fr Sw CR Tw Th Ch SK PhIn Indo

21. N ational T ransfer A ccounts Issue 3. Support Systems for the Elderly. How do they differ across countries? How do they differ across countries? Do Asian countries rely more on familial transfers and Western and Latin American countries more on public transfers? Do Asian countries rely more on familial transfers and Western and Latin American countries more on public transfers? Does the expansion of public systems crowd saving as hypothesized by Feldstein? Does the expansion of public systems crowd saving as hypothesized by Feldstein? Or familial transfers? Or familial transfers?

22. N ational T ransfer A ccounts 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.

23. N ational T ransfer A ccounts Reliance on assets in old-age

24. N ational T ransfer A ccounts 65-year-olds 67% assets, 2% public, 32% private 85-year-olds 23% assets, 39% public, 38% private

25. N ational T ransfer A ccounts

27. 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.

28. N ational T ransfer A ccounts Asset-based reallocations and public transfers have increased over time; familial transfers have declined precipitously. NHI began in 1995; net public transfers increased.

29. N ational T ransfer A ccounts Summary of Support Systems Estimates are preliminary Estimates are preliminary Old-age support systems Old-age support systems Show wide variation Show wide variation Vary with the age of the elderly Vary with the age of the elderly Are changing rapidly Are changing rapidly Familial support system for the elderly Familial 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 time Upward in rest of Asia, but declining over time Downward in Latin America Downward in Latin America

30. N ational T ransfer A ccounts Warnings! NIPA and NTA are incomplete NIPA and NTA are incomplete Time Time Environment Environment Aggregate data vary in quality and coverage Aggregate data vary in quality and coverage Imputing values to individuals based on values for households is difficult Imputing values to individuals based on values for households is difficult

31. N ational T ransfer A ccounts Final Remarks Economic resources shifted across age are enormous. Economic resources shifted across age are enormous. Important in many respects Important in many respects Accumulation of human and physical capital Accumulation of human and physical capital Generational equity Generational equity Economic growth Economic growth Externalities to childbearing Externalities to childbearing Measuring and studying these flows is difficult but essential. Measuring and studying these flows is difficult but essential.

32. N ational T ransfer A ccounts Support for this project has been provided by: National Institute on Aging: R37-AG025488 and R01-AG025247 National Institute on Aging: R37-AG025488 and R01-AG025247 NUPRI MEXT Academic Frontier Project, Government of Japan NUPRI MEXT Academic Frontier Project, Government of Japan 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)

33. N ational T ransfer A ccounts 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-Director Mason, Andrew, Co-Director Auerbach, Alan Miller, Tim Lee, Sang-Hyop Donehower, Gretchen Ebenstein, Avi Wongkaren, Turro Takayesu, Ann Boe, Carl Comelatto, Pablo Sumida, Comfort Schiff, Eric Stojanovic, Diana Langer, Ellen Chawla, Amonthep Pajaron, Marjorie Cinco

34. N ational T ransfer A ccounts 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, Hajime Suzuki, Kosuke Akasaka, Katsuya Moriki, Yoshie Makabe, Naomi Ogawa, Maki

35. N ational T ransfer A ccounts Australia Key Institution: Australia National University Jeromey Temple, Country Leader Brazil Turra, Cassio, Country Leader Lanza Queiroz, Bernardo Renteria, Elisenda Perez Chile Key Institution: United Nations Economic Commission for Latin America and the Carribean, Santiago, Chile Bravo, Jorge Mauricio Holz

36. N ational T ransfer A ccounts Taiwan Key Institution: The Institute of Economics, Academia Sinica, Taipei, Taiwan. Tung, An-Chi, Country Leader Lai, 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

37. N ational T ransfer A ccounts 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. Mexico Key Institution: Consejo Nacional de Población Partida, Virgilio, Country Leader Mejía-Guevara, Iván

38. N ational T ransfer A ccounts 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

39. N ational T ransfer A ccounts Uruguay Bucheli, Marisa, Country Leader Furtado, Magdalena Rodrigo Ceni Cecilia Rodriguez South Korea An, Chong-Bum, Country Leader Chun, Young-Jun Lim, Byung-In Kim, Cheol-Hee Jeon, Seung-Hoon Gim, Eul-Sik Seok, Sang-Hun Kim, Jae-Ho

40. N ational T ransfer A ccounts 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 Institute Gal, Robert Medgyesi, Marton Finland Key institutions: The Finnish Center for Pensions And the Finnish Pension Alliance Vanne, Reijo Gröhn, Jukka Vaittinen, Risto

41. N ational T ransfer A ccounts United States Key Institution: Center for the Economics and Demography of Aging Lee, Ronald, Country Leader Miller, Tim Ebenstein, Avi Boe, Carl Comelatto, Pablo Donehower, Gretchen Schiff, Eric Langer, Ellen

42. N ational T ransfer A ccounts Kenya Mwabu, Germano Nigeria Soyibo, Adedoyin

43. N ational T ransfer A ccounts Thank you