Demographic Dividends
and
National Transfer Accounts
Andrew Mason
University of Hawaii at Manoa
East-West Center
National Transfer Accounts
Demographic transition leads to two
important changes in age structure
Working age population
►


In recent decades, the share of the working age
population has been increasing.
Transitory phenomenon: In the future, the share of
the working age population will decline.
Dependent populations
►


Share of children is declining;
Share of elderly is increasing.
National Transfer Accounts
Population Age Structure
Taiwan, 1950-2050
100
Elderly (65+)
90
Percentage
80
70
Children (0-19)
60
50
40
Working age (20-64)
30
20
10
0
1950
1960
1970
National Transfer Accounts
1980
1990
2000
2010
2020
2030
2040
2050
Two Demographic Dividends
► First
Dividend
 Per capita income rises (and falls) with the
share of the population in working ages.
 Favorable effects on economic growth in many
countries in Asia and elsewhere.
 However, first dividend will soon turn negative.
National Transfer Accounts
Two Demographic Dividends
► Second
Dividend
 Increase in the population at old ages will lead
to greater wealth.
 Two possible outcomes:
►More
capital and higher wages
►Foreign investment
 Higher standards of living in the domestic and
the foreign economy.
National Transfer Accounts
Illustrative Simulations
► ASEAN
age structure, 1950-2050. Source:
UN Population Prospects 2006.
► Economic assumptions based on estimates
from the National Transfer Account project.
► Details of simulation model available on the
NTA website.
National Transfer Accounts
Net Saving Rate, ASEAN
0.25
Net Saving Rate
0.2
Low IG Transfers
0.15
0.1
0.05
High IG Transfers
0
1940
1960
National Transfer Accounts
1980
2000
2020
2040
2060
Source: Mason, Lee, and Lee 2007.
ASEAN, Assets/Labor Income
Assets/Labor Income .
8
6
Low IG Transfers
4
High IG Transfers
2
0
1940
1960
National Transfer Accounts
1980
2000
2020
2040
2060
Source: Mason, Lee, and Lee 2007.
Consumption Index (1950=100) .
ASEAN, Effect of Age Structure on
Consumption
160
Low IG Transfers
140
High IG Transfers
120
100
80
1940
1960
National Transfer Accounts
1980
2000
2020
2040
2060
Source: Mason, Lee, and Lee 2007.
Effect of age structure depends on . . .
► Economic
lifecycle
 Age profile of labor productivity
 Age profile of consumption
► Economic
support system
 Public transfers
 Familial transfers
 Assets
National Transfer Accounts
Objective of the National Transfer
Account (NTA) Project
►
►
Develop and apply a comprehensive system for measuring
economic flows across age groups in a manner consistent
with the System of National Accounts
Analyze the interplay between age, policy, and
macroeconomic performance
 How do economic flows vary with age and why?
 How will changes in age structure affect our economies?
 What policies should be pursued in light of these findings?
► Economic
lifecycle
► Transfers, saving, and investment
► Age structure: fertility and immigration.
National Transfer Accounts
Organization of the project
► East-West
Center and CEDA, UC-Berkeley
► Nihon University Population Research Institute,
Asia Regional Office
► Funding





NIA
UNFPA
IDRC
MacArthur Foundation
Others
► www.ntaccounts.org
National Transfer Accounts
Research Teams for 23 Economies
National Transfer Accounts
Per Capita Economic Lifecycle
Taiwan, 2003
Relative to Yl(30-49)
1.2
Labor Income
1
0.8
Consumption
0.6
0.4
0.2
0
0
10
National Transfer Accounts
20
30
40
50
60
70
80
90+
Per Capita Lifecycle Deficit (C-Yl)
Taiwan, 2003
0.8
Relative to Yl(30-49)
0.6
0.4
0.2
0
-0.2
0
10
20
-0.4
Total cost (LCD) of raising
child -0.6
from birth to age 25 is
14.0 years of labor by a
prime-age adult.
National Transfer Accounts
30
40
50
60
70
80
90+
Total cost (LCD) of supporting
elderly surviving to age 90 is
15.9 years of prime-age adult
labor.
Issue 1. How does the economic
lifecycle vary and why?
► Economic
factors, e.g., income, economic structure,
and technology.
► Cultural and institutional factors
► Demographic factors
 Quantity-quality tradeoff
 Age structure and political power
► Policy




Education
Retirement
Pensions
Health care
National Transfer Accounts
Age Profile of Labor Income, Taiwan
In Taiwan, earning span
is being “squeezed”.
► Between 1978 and 2001
labor income at age 21
declined from 45% to
24% of an adult 30-49.
► Labor income at age 60
declined from 63% to
35% of an adult 30-49.
►
1.2
1
Yl(x)/Yl(30-49)
0.8
1978
0.6
2001
0.4
0.2
0
12
22
32
42
National Transfer Accounts
52
62
72
Age-profile of Consumption, Taiwan
► Consumption
0.9
0.8
0.7
2001
0.6
0.5
0.4
0.3
1978
0.2
0.1
0
0
10
20
30
40
50
60
70
80
90
C/Yl(30-49)
increased
relative to labor
income by about 1%
per year at most ages.
► Much more rapid
increase in
consumption by
children.
► Cause is growth in
spending on education.
National Transfer Accounts
LCD Children/Yl(30-49)
Tradeoff: Spending per Child and
Number of Children, 13 Countries
16
15
14
13
12
11
10
9
8
7
6
y = -7.7914x + 15.473
R2 = 0.6125
0.2
0.4
0.6
0.8
1
Child Dependency Ratio: N(0-19)/N(20-59)
National Transfer Accounts
1.2
LCD Children/Yl(30-49)
Tradeoff: Spending per Child and
Number of Children, 13 Countries
16
15
14
13
12
11
10
9
8
7
6
Jp
US
Tw
Ch
SK Th
Sw
Fr
Ur
CR
Indo
In
Ph
0.2
0.4
0.6
0.8
1
Child Dependency Ratio: N(0-19)/N(20-59)
National Transfer Accounts
1.2
LCD Elderly/Yl(30-49)
Tradeoff: Spending per Elderly and
Number of Elderly, 13 Countries
12
11
10
9
8
7
6
5
4
3
2
y = 11.993x + 4.5285
R2 = 0.4266
0.1
0.15
0.2
0.25
0.3
0.35
0.4
Old-age Dependency Ratio: N(60+)/N(20-59)
National Transfer Accounts
0.45
0.5
LCD Elderly/Yl(30-49)
Tradeoff: Spending per Elderly and
Number of Elderly, 13 Countries
12
11
10
9
8
7
6
5
4
3
2
US
CR
Th
Ch
Ur
Jp
Fr
Tw
Sw
SK
Ph In
Indo
0.1
0.15
0.2
0.25
0.3
0.35
0.4
Old-age Dependency Ratio: N(60+)/N(20-59)
National Transfer Accounts
0.45
0.5
Summary
► Changes
in the economic lifecycle may be
reinforcing the effects of changes in the
dependency ratio.
 Earnings by children and the elderly are declining.
 Spending per child is rising.
 Spending per elderly is rising.
► “Costs”
of children may be declining more slowly
than the number of children;
► “Costs” of the elderly may be increasing more
rapidly than the number of elderly.
National Transfer Accounts
Issue 2: How do the systems governing interage economic flows vary and why?
►
►
►
►
Flows to children and the elderly are both important.
Transfers dominate flows to children but the relative
importance of the state and the family vary from country to
country.
The elderly rely on public and familial transfers and assetbased flows – income from assets and dis-saving.
The systems for the elderly vary among countries and are
changing substantially over time
 Public policy (pension and health care reform).
 Role of the family – decline in extended family.
 Development of financial sector.
National Transfer Accounts
Old-age Reallocation System, Selected Countries.
Familial transfers equally
important in Thailand, Korea,
and Taiwan (36-40%).
Net public transfers to
elderly are zero in Thailand;
about 25% in Taiwan and
Korea.
100
0
Net familial transfers
near zero in US, CR,
and J. Large public
transfers in CR and
J. More reliance on
assets in US.
25
75
Public
transfers (%)
Thailand
US
50
Asset-based
(%)
50
Korea
Costa Rica
75
Taiw an
25
Japan
100
0
100
National Transfer Accounts
75
50
Fam ily Transfers (%)
25
0
Old-age Reallocation System, 65 to 85-year-olds,
Taiwan, 2003.
100
65-year-olds
67% assets, 2%
public, 32% private
0
25
75
Public
transfers (% )
50
50
Asset-based
(% )
75
25
85-year-olds
23% assets, 39%
public, 38% private
100
0
100
National Transfer Accounts
75
50
Family Transfers (% )
25
0
Old-age Reallocation System, 65-85-year-olds,
Taiwan, 2003.
100
0
25
75
From ages 65 to 80,
familial share varies
little. Public rising
and asset-based
declining.
Public
transfers (% )
50
50
Asset-based
(% )
25
After 80 familial
share is rising and
asset-based
declining.
75
100
0
100
National Transfer Accounts
75
50
Family Transfers (% )
25
0
Old-age Reallocation System, 75-year-olds,
Taiwan, 1977-2003.
Asset-based
reallocations and public
transfers have increased
over time; familial
transfers have declined
precipitously.
100
0
NIH began in 1995;
net public transfers
increased.
25
75
Public
transfers (% )
50
50
Asset-based
(% )
1977-1994
75
1995-2003
25
100
0
100
National Transfer Accounts
75
50
Family Transfers (% )
25
0
Summary
► Old-age
support systems
 Vary widely across countries
 Vary with the age of the elderly
 Are changing rapidly
► Familial
support system
 Declined in Taiwan
 Similar to Korea and Thailand in importance
 In Japan, the elderly make net transfers to their
children and grandchildren.
National Transfer Accounts
Concluding Remarks
► Difficult
to construct National Transfer Accounts.
► Estimates presented here are preliminary.
► Over time we will refine the methodology and
compile an extensive set of data for many
countries.
► Understanding the role of age in the economy is
essential to developing appropriate policy – both
economic and population policy.
National Transfer Accounts
Acknowledgements
► National
Institute on Aging R01-AG025488.
► United Nations Population Fund – Asia’s
dependency transition: Intergenerational
equity, poverty alleviation and public policy
► Ronald Lee, Co-Principal Investigator
► Naohiro Ogawa, Principal Investigator for
UNFPA Asia Regional Project
National Transfer Accounts
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
National Transfer Accounts
Takayesu, Ann
Boe, Carl
Comelatto, Pablo
Sumida, Comfort
Schiff, Eric
Stojanovic, Diana
Langer, Ellen
Chawla, Amonthep
Pajaron, Marjorie Cinco
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
National Transfer Accounts
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, Country Leader
National Transfer Accounts
China
Key Institution: China Center for Economic
Research,
Beijing, China.
Ling, Li, Country Leader
Chen, Quilin
Jiang, Yu
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
National Transfer Accounts
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
National Transfer Accounts
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.
Sweden
Key Institution: Institute for Future Studies, Stockholm, Sweden.
Lindh, Thomas, Country Leader
Johansson, Mats
Forsell, Charlotte
National Transfer Accounts
Uruguay
Bucheli, Marisa, Country Leader
Furtado, Magdalena
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
National Transfer Accounts
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
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
National Transfer Accounts
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
National Transfer Accounts
Kenya
Mwabu, Germano
Nigeria
Soyibo, Adedoyin
National Transfer Accounts
Thank you
National Transfer Accounts