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Aging and Social Policy: An International Perspective Andrew Mason Sang-Hyop Lee Ronald Lee...
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Transcript of Aging and Social Policy: An International Perspective Andrew Mason Sang-Hyop Lee Ronald Lee...
Aging and Social Policy:An International Perspective
Andrew MasonSang-Hyop Lee
Ronald LeeChong-Bum An
Outline
I. Background: National Transfer Accounts
II. Estimating the Economic Lifecycle1. Consumption and labor income by age for Korea
2. Comparison with Taiwan and the US
III. The Age Reallocation System1. Estimates for Korea
2. Comparison to Taiwan and the US
IV. Conclusions
National Transfer Accounts
• System for measuring economic flows across age groups in a manner consistent with National Income and Product Accounts
• Comprehensive– Asset-based reallocations
• Public and private saving• Public and private credit
– Public transfers– Private transfers
• Inter vivos inter-household• Intra-household• Bequests
National Transfer Accounts
• Issues being explored:– How do economic support systems evolve within
countries and differ across countries?– How do economic support systems interact with age
structure to influence macro-economic performance and generational equity?
– How should policies with respect to public pensions, health care, and education change over time?
– What are the appropriate roles of the family and the state in providing support to children and the elderly?
NTA Project Organization
• Coordination – Ronald Lee (UC – Berkeley)– Andrew Mason (East-West Center/UH)
• Core support: National Institute on Aging• Website: www.ntaccounts.org• Countries currently participating in the project
– Korea: An Chong-Bum (SungKyunKwan University)– Taiwan: Andrew Mason and An-Chi Tung (Academia
Sinica, Taipei)– US: Ronald Lee– 14 other countries are members of the project
II. The Economic Lifecycle
The Economic Lifecycle of Korea, Annual Aggregate Flows, Nominal Values, 2000
0
2000
4000
6000
8000
10000
12000
140000 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85
90+
Won (billions)
. Labor Income
Consumption
Surplus
Deficits
Features of the Economic Lifecycle
• Age refers to people not household heads.• Consumption
– Includes all public and private consumption– Age allocation is based on consumption surveys
(private) and administrative records (public)
• Labor income includes – wages and salaries– labor’s estimated share of mixed income– taxes paid by employers on behalf of employees
including a portion of indirect taxes
Lifecycle of Korea (2000), Per Capita Values
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
0 10 20 30 40 50 60 70 80 90+
Rel
ativ
e to
Yl(20
-39)
.
Labor Income
Consumption
EducationSpending
Female LFPRs
C declines with age
Lifecycle of Taiwan (1998) and Korea (2000), Per Capita Values
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
0 10 20 30 40 50 60 70 80 90+
Rel
ativ
e to
Yl(20
-39)
.
Labor Income
ConsumptionK
K
T
T
Lower C in ROK
Higher LFPRsIn ROK
Lifecycle of US (2000) and Korea (2000), Per Capita Values
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
0 10 20 30 40 50 60 70 80 90+
Rel
ativ
e to
Yl(20
-39)
.
Labor Income
Consumption
K
K
US
US
US LFPRs >
ROK LFPRs
High US C is health care
ROK LFPRs >
US LFPRs
Some Implications
• A given rise in the older population has a much greater impact in the US given current LC. However, aging is much more rapid in ROK.
• Importance of female employment.• Reducing the LC deficit at old ages is not simply
a matter of higher LFPRs among the elderly. High productivity jobs needed.
• Rising health care costs is the Achilles heel if US experience is any guide.
Table 1. A Classification of NTA Reallocations (revised 1/13/06).
Asset-based Reallocations
Transfers
Capital and Other Non-Financial
Assets Credit
PublicPublic infrastructurePublic land and sub-soil minerals
Public debtStudent loans
Money
Public educationPublic health careUnfunded pension
plans
Private
HousingConsumer durables
Factories, FarmsPrivate land and sub-soil minerals
Inventories
Consumer credit
Familial support of children and parents
BequestsCharitable
contributions
Source: Adapted from Lee 1994.
The Age Reallocation System
The Transfer Option
0
2000
4000
6000
8000
10000
12000
14000
0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85
90+
Labor Income
Consumption
Tax workers. Provide cash and in-kind
payments to the elderly
The Saving Option
0
2000
4000
6000
8000
10000
12000
14000
0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85
90+
Labor Income
Consumption Invest
AssetIncome & Dissaving
Transfers vs. Saving
• Both can satisfy reallocation objectives.
• Transfers can do so immediately; saving only with a delay.
• Saving is pro-growth.
• Other research shows that aging can lead to substantial capital deepening if transfer programs are kept in check.
Age Reallocations, Korea, 2000, Per Capita Annual Flows
-10000
-5000
0
5000
10000
15000
0 10 20 30 40 50 60 70 80 90+
Asset-based Reallocations Public Transfers
Inter Vivos Transfers Bequests
Total Inflows
Total Outflows
How are Taiwan, Korea, and the US financing old-age consumption?
0
10
20
30
40
50
60
70
80
90
100
US (2000) Korea (2000) Taiwan (1998)
Per
cent of co
nsu
mption .
Work
Asset-basedReallocation
FamilialTransfers
PublicTransfers
Note. Familial transfers do not include bequests.
Large public transfers in US
Total transfers much greater in Korea
Asset-based reallocationsmuch greater
in the US!
Why are asset-based reallocations so low in Korea and Taiwan?
• Did familial transfers crowd out saving?
• Did familial transfers fill a gap that saving could not meet? – High rates of growth in Korea and Taiwan led
a 6-fold increase in lifetime earnings each generation.
– Unlikely that saving rates could be high enough to achieve the flat age profiles of consumption.
Lesson to Draw
• Familial transfers served East Asia well by maintaining generational equity during a period of very rapid economic growth.
• Slower economic growth and population aging shift to asset-based reallocations.
• High saving rate and shift away from familial support systems are welcome developments.
The End
NT Flow Account Identity:
• Inflows– Labor income– Capital income– Interest income– Transfer inflows
• Outflows– Consumption– Investment– Accumulation of credit – Transfer outflows
l k my y y K Mc I I
NT Flow Account Identity:
Lifecycle Deficit =
Age Reallocations =
Capital-based Reallocations +
Credit-based Reallocations +
Net Transfers
lC y
k ky I
m My I
NT Flow Account, Aggregate. Taiwan, 1998 (NT$ billion), nominal
Age
Total 0-19 20-29 30-49 50-64 65+
Age Reallocations 832 1894 6 -1569 -25 526
Asset-based reallocations 861 -16 -210 605 299 184
Asset Income 2,456 3 139 1492 585 237
Less: Saving 1,595 19 349 887 286 54
Transfers -29 1910 216 -2174 -323 342
Public, current 2 579 76 -692 -138 176
Private, current -31 1330 65 -1568 -95 236
Capital transfers 0 0 75 86 -91 -70
Lower panel measures the reallocation systems employed to satisfy the lifecycle deficits and surpluses at each age. Asset-based reallocations combine capital, other non-financial assets, and credit.
Source: Mason, Lee, Tung, Lai, and Miller, forthcoming.