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Comments on Intergenerational Transfers, Age Structure, and Macroeconomics

Comments on Intergenerational Transfers, Age Structure, and Macroeconomics. Sang-Hyop Lee University of Hawaii at Manoa WEAI 83 rd Annual Conference, Honolulu, USA July 2, 2008. Do they look alike ?. Some age profiles show similar pattern

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Comments on Intergenerational Transfers, Age Structure, and Macroeconomics

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  1. Comments onIntergenerational Transfers, Age Structure, and Macroeconomics Sang-Hyop Lee University of Hawaii at Manoa WEAI 83rd Annual Conference, Honolulu, USA July 2, 2008 National Transfer Accounts

  2. Do they look alike? • Some age profiles show similar pattern • Economic lifecycle is influenced by biology. Individual choices and economics constraints are similar. • Some age profiles are quite different. • Source of supports are quite different (triangle graphs) • However, even for similar age profiles, there are IMPORTANT differences and similarities across countries and over time. National Transfer Accounts

  3. Important differences National Transfer Accounts

  4. Source of differences • Population structure matters • Level of development matters • Consumption on elderly is high in rich countries, and is mostly due to medical expenditures • Richer countries have larger public consumption expenditures, on both health and education. • Consumption on children is low in low-income countries. • Richer countries have low LFPRs for children and elderly • Richer countries have low share of self-employment income National Transfer Accounts

  5. Old-Age Reallocation SystemsSource: Andrew Mason. Asset Capital-based transformation Social welfare transformation Traditional society? Familial Transfers Public Transfers National Transfer Accounts

  6. Policy matters.Public Education Consumption of China China 1995 & 2002, per capita Ratio Age National Transfer Accounts

  7. Policy may have other consequences.Private education consumption of China China 1995 & 2002, per capita Ratio Age National Transfer Accounts

  8. Institution matters.Kenya and Nigeria Public consumption of Education National Transfer Accounts

  9. Disaster/Crisis matters. National Transfer Accounts

  10. Data matters. • Constructing NTA requires lots of data sets. • A good data set has the properties of • Extent (richness): it has the variables of interest at a certain level of details. • Reliability: the variables are measured without error. • Validity: the data set is representative. • E.g.) Asset based reallocations • A lot of countries use information on inflow, but the profiles of outflow might be different • Find a proxy (until you find a better proxy) • One type of asset income • Use ratio of survey • Use other country data! (Kenya vs. Uganda) National Transfer Accounts

  11. In acomparative analysis, • Computing confidence intervals helps. • Comparing countries with similar culture, policy, economic development helps (regional analysis) • Each country has its own issues; how does it make the country different from others? • China: urban vs. rural issues, negative LCD • India: public sector age reallocations. • Kenya & Nigeria: composition of consumption (education). Tax for education is earmarked. • Mexico: Revenue from oil, remittances. National Transfer Accounts

  12. Comparative Analysis (Cont’d) • In particular, replication of some interesting results in another country setting greatly increases the confidence of the results. • Comparing components is useful. (education/health/pension benefit/..) • Comparing within a country across years has an advantage. • Do more analysis. National Transfer Accounts

  13. E.g. of “Do more analysis”.India and Mexico has different labor income profile National Transfer Accounts

  14. Not mainly due to active population (L/N) by age, National Transfer Accounts

  15. but due to different productivity per worker. National Transfer Accounts

  16. Conclusion; Let me repeat “The goals of the NTA project” • Develop a system of economic accounts that can be used to study the macroeconomic implications of aging. • Estimate the accounts with historical depth for economies with different cultures, levels of development, economic systems and policies. • Analyze and explain • variation in the economic lifecycle and the reallocation systems, • macroeconomic effects of population aging, (simulation) • economic implications of education, pension, health care, child subsidies, and other policy. National Transfer Accounts

  17. Thank you. National Transfer Accounts

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