Presentation in Honor of Richard Easterlin

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Presentation in Honor of Richard Easterlins
Continuing Contributions A Macro-Perspective on
Intergenerational Transfers

• Ronald Lee
• UC Berkeley
• Material from NTA project, funded by NIA grants
  to Andy Mason and Ron Lee

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Comparative International Scope

• Main NIA funded project, Lee and Mason teams for
  each country.
• United States
• Taiwan
• Japan
• Indonesia
• Chile
• Brazil
• France
• Additional countries funded by UNFPA, Ogawa at
  Nihon Univ.
• China
• India
• Philippines
• Thailand
• Uruguay (in-country UNFPA support)
• Individuals in additional countries may
  participate with own funding
• Sweden
• S. Korea
• Austria
• Slovenia

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References downloadable from http//www.schemear
ts.com/proj/nta/web/nta/show/Working20Papers

• 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)

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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.

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2. The economic life cycle Labor earnings and
consumption per capita
Output per person per year
Labor earnings, yl(x)

Consumption, c(x)

• - - -
• - - - -

• - -
• - - - -

Age
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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
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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

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2050
3
-2
United States Lee Miller
Lee, 2000, 2003 (see cv)
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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.

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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)

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Source See Lee, Lee and Mason (2005).
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Source See Lee, Lee and Mason (2005).
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Mason, Lee, Tung, Mun-Sim Lai, and Miller (2005)
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Mason, Lee, Tung, Mun-Sim Lai, and Miller (2005)
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How the elderly fund consumption
Mason, Lee, TungMun-Sim Lai, and Miller (2005)
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Another illustration of what can be done with
historical depth and projections
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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

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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
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USA and France A Comparison (see Stephane Zuber)
NPVs for the US
NPVs for France
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USA and France Accounting for the differences
(1) seeStephane Zuber
Spending as Percent of GDP US
Spending as Percent of GDP France
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The End