proceedings Workshop on Global Aging

Organized by the Retirement Research Center

Sponsored by the Social Security Administration University of Michigan Table of Contents Retirement Research Agenda 1 Center Foreword 2

Proceedings 7

Biographies 30

The aims of the Michigan Retirement Research

Center are to foster research on retirement issues,

to convey findings to the academic and policy

communities and to the public, to support the

training of a new generation of scholars, and to

facilitate access to relevant data and information.

Michigan Retirement Research Center

University of Michigan Institute for Social Research

P.O. Box 1248 Ann Arbor, MI 48106-1248

Phone: (734) 615-0422 Fax: (734) 615-2180 E-mail: [email protected]

Website: http://www.mrrc.isr.umich.edu/

The opinions expressed herein are solely those of the authors and discussants and should not be construed as representing the opinions or policy of the Social Security Administration or any agency of the Federal Government or the Retirement Research Centers.

Agenda

12: 30 p.m. Welcome John Laitner, Director, University of Michigan Retirement Research Center

Paul Hewitt, Deputy Commissioner for Policy, Social Security Administration

SESSION I: Presentation of World Economic Forum Report on Global Aging

12:40 p.m. Living Happily Ever After: The Economic Implications of Aging Societies Sylvester Scheiber, Watson Wyatt Worldwide

Discussants: Edward Gramlich, Board Alan Gustman, Dartmouth College Richard Jackson, Center for Strategic and International Studies John Shoven, Stanford University

SESSION II: Topics for Future Research on Global Aging: Discussion of Two Reports

3:00 p.m. Moderator: Peter Heller, International Monetary Fund

Global Aging: Issues, Answers, More Questions Axel Börsch-Supan, University of Mannheim

The Impact of Aging on Financial Markets and the Economy: A Survey Barry Bosworth, Ralph Bryant, and Gary Burtless

Discussants: Marilyn Moon, American Institutes for Research Moritz Kraemer, Standard & Poor’s Andrew Abel, University of Pennsylvania

4:55 p.m. Closing

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Foreword On May 17, 2004, I had the workforce more promptly, and pleasure of co-organizing, with firms to use labor more frugally. Paul Hewitt, on behalf of the If we foresee that the price of Michigan Retirement Research new capital goods will fall in the Center and the Social Security near future as global aging Administration, a Workshop on perhaps reduces the need for global aging. The write-up investment expenditures, prices below, containing excellent of common stocks should begin summaries by Amanda Sonnega, a gradual decline now, in reviews highlights from the anticipation. In the end, it seems event. The MRRC web site that markets by themselves may contains copies of the original be able to cope well with some papers.1 Although the of the outcomes of global aging documents speak for themselves, identified in the summaries the Workshop is one step in an below. ongoing research agenda, and I would like to use the present Looking beyond markets, one introduction to begin to address role for government is to the following overall question: enhance the development and What is the role of government diffusion of information about in coping with the challenges coming changes. Small as well and likely consequences of as large businesses should be global aging, and what facets are aware, for instance, of best left to private-sector predictable changes in the size markets to deal with alone? and composition of the labor force in coming years – so that In a market system, prices are markets can generate efficient supposed to adjust constantly to responses. Publications, public maintain the balance of supply discussion, and sponsored and demand. If demographic research are, of course, tried and forces influence saving more or true mechanisms for obtaining less than investment, interest and spreading knowledge. rates should move to re-equate the two. If labor supplies One possible gap in knowledge, diminish, the price of labor—the it seems to me, relates to the wage rate—should rise. The inevitability and time path of latter should encourage older global aging itself. Global aging workers to postpone retirement, results from declining fertility younger workers to join the and increasing longevity. Historical data enable us to

1 predict trend lines for each of See www.mrrc.isr.umich.edu. these two forces, and the

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analyses in the Workshop the President 2004, ch.6, for extrapolate these trends. example, highlights solvency However, fertility is a problems from an even longer- complicated topic. Presumably term perspective. The children are a luxury good, so Workshop presentations, that households tend to want beginning with Sylvester more as incomes rise; yet, Schieber’s, emphasize this children are also expensive in looming crisis. terms of parental time, so that as wages rise, households will The Workshop had, on the other tend to want less. Professor hand, less chance to consider Gary Becker of the University related budgetary challenges of Chicago has provided a from aging. A number of general model in which parental presenters noted that private concern with child quality can pension plans of the defined lead to changes in fertility. benefit nature face pressures Additional time series and from rising ratios of retirees to international cross-sectional workers analogous to those data sources are increasingly confronting Social Security; available. If discussions of however, we could go further to global aging can be grounded in worry about the Federal a quantitative, theoretical model Government’s role, and potential of fertility, we can better predict liabilities through the Pension which factors will mitigate, or Benefit Guarantee Corporation, exacerbate, projected trends in in protecting the integrity of the future. For example, if these pensions.2 global aging causes wages to rise in the future, might fertility Perhaps even more important, decline even further? with the exception of Marilyn Moon’s discussion, the A second role for government is Workshop tended not to dwell to prepare its own budget for on budgetary challenges the changes that demographic stemming from rising medical trends will bring. The report of costs. Medical expenditures in the President’s Commission to the U.S. were less than 5% of Strengthen Social Security GDP 25 years ago; today they about two years ago warned that are 10-15%. Their future course the pay-as-you-go U.S. Social is risky to predict. The federal Security System will encounter government has had a direct serious solvency troubles within financial responsibility in this 30-35 years as Baby Boomers retire. The Economic Report of 2www.mrrc.isr.umich.edu/conferences/ past/rrc04-belt.pdf

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area since the advent of Fourth, government sets the Medicare and Medicaid in the legal and regulatory environment 1960s. The Economic Report of for market actions, and through the President 2004, Chart 6-5 taxes and budgetary (ch.6), shows that Medicare and commitments it tries to Medicaid together today account compensate for forces external for about the same slice of the to market-price incentives. One federal budget as Social Security area of special concern in this benefits; however, the Chart sphere is the age at which shows that by 2080, Medicare workers choose to retire. As and Medicaid may well have advances in health care lengthen over twice as large a budget life spans, one might expect share as Social Security. Parts people to choose later and later of Medicare have exactly the ages for retirement. This does same pay—as—you—go not seem to be happening – in structure as Social Security. It is fact, the contrary seems to be difficult to see how the federal occurring, especially in parts of government can control its Europe. If existing Social budget deficits, and stabilize or Security and tax statutes tend to reduce the national debt, without encourage retirement at earlier reforming medical spending as ages than would otherwise well as Social Security. This prevail, global aging increases would be a challenge without the urgency for consideration of global aging; with global aging, reform. the challenge will surely be greater. Another issue is private pensions. Many companies are A third role of government lies changing from defined benefit to in the provision of human defined contribution plans. capital. In the U.S., we entrust Private pensions are an government, primarily state and important resource for retirees; local government, to finance given the concerns of this much of our education system. Workshop, the integrity of In an era of falling ratios of private pension systems is likely workers to retirees, enhancing to assume even more the productivity of remaining significance in coming years. workers is vital. As part of its Government, through the response to global aging, Pension Benefit Guarantee perhaps government should be Corporation, for example, reassessing its planning in this shouldered some responsibility area. for defined benefit pensions in the private sector; it may want to

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take a corresponding role for interesting analysis remains to defined contribution plans. A be done. The Centers that new concern is that some comprise the Retirement workers have little experience Research Consortium will in the management of a continue to conduct research and financial portfolio that a defined engage in the policy analysis that contribution plan requires. this task requires.

International capital flows might raise additional worries for investors and regulators. Although several Workshop presentations noted the potential John Laitner, Director MRRC of foreign financial investment in less developed countries to preserve high rates of return in the face of aging OECD populations, investments in “emerging markets” have proven risky in the past. It is also true that countries undergoing rapid growth may not (perhaps recalling a colonial status in the past) welcome foreign owners, and they may generate surprisingly high domestic savings rates – even rates high enough to exceed their extraordinary rates of physical investment (e.g., China). Prudent planning for retirement entails portfolio diversification, and in determining portfolio allocations, we must be careful not to underestimate risks that foreign securities carry.

Given all of the factors that need to be considered, including private-sector behavioral responses, it seems that much

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Proceedings

MRRC/SSA Workshop on Global Aging

s part of on-going efforts to promote discussion and awareness of long as well as A short-run factors affecting the demand for and demands on social insurance programs, the Michigan Retirement Research Center (MRRC) and the Office of Policy at the Social Security Administration (SSA) jointly sponsored a half-day workshop on May 17, 2004 that examined the present and future impacts of global aging. The workshop’s primary goal was to gather subject area experts to bring into focus important issues which policy-makers will need to address in coming years.

Welcome Mr. Hewitt suggested that, as policy makers consider reform John Laitner, Director of the options, the President has MRRC, began the proceedings clearly indicated that some sort by noting that global aging is of funded approach to Social the result of two forces: Security is most consistent with increasing longevity and creating stability for retirement declining birthrates. The first is finances in the long run. Mr. unambiguously “good news”; Hewitt also pointed out that the second is arguably positive aging trends are occurring at a as well since it will lead to time when the world economy is reduced pressure on limited highly globalized. This creates natural resources, potentially some problems but many reduce congestion and pollution, opportunities. For example, as and perhaps allow more multinational companies begin investment per capita on to invest in a rapidly growing education and health. economy like China, the Nevertheless, global aging prospect emerges for such trends exert increasing pressure companies to trade securities on on social insurance programs Chinese exchanges. This could world-wide. He then introduced ease pressures on U.S. Paul Hewitt, Associate exchanges as baby boomers Commissioner for Policy of the liquidate retirement holdings. SSA. He underscored the importance

of international cooperation.

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Session I: several characteristic population Presentation of World growth patterns that are Economic Forum evolving in the world. He then Report on Global explored some of the Aging implications of this on economic performance for Living Happily Ever After: developed countries. Finally, he The Economic Implications turned to the challenges to of Aging Societies fulfilling the economic Sylvester Scheiber, Vice aspirations that many societies President of Research and hold given this background. Most countries fall Information at Wyatt Watson Worldwide, provided an Most countries fall into one of into one of four executive summary of his report four evolving population to the World Economic Forum structures, which are highly evolving population with Steven Nyce. The report correlated with their stage of economic development. The structures, which examines the impact of shrinking labor forces on graph below depicts a are highly economic growth prospects in traditional structure, with more the European Union (EU) and young people and decreasing correlated with their other industrialized countries numbers of people in each age and explores various options for category as age increases. This stage of economic influencing current trajectories. is the classic pyramidal Dr. Scheiber began by structure. Developing countries development. reviewing various global fall into this category, with demographic trends, describing relatively high fertility rates and shorter life expectancy.

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A second category of countries, substantially. In some cases which are at an intermediate immigration rates continue to stage of economic development, contribute to population growth. such as Mexico, shows a Canada is a good example of a narrowing of the bottom of the country in this category where graph as fertility rates begin to the population distribution fall and improved public health assumes a nearly completely leads to increasing life rectangular shape. expectancy. The shape of the distribution is still pyramidal The fourth population age toward the top at the oldest ages structure is represented by but becomes more rectangular countries like Italy and Japan from birth to age 55. We can where fertility rates have fallen expect that developing countries to dramatically low levels and will move in this direction, and life expectancy has increased their population structure will substantially. In Italy and Spain begin to assume this shape the fertility rate is below 1.2. In within the next three decades. Germany and Japan, it is 1.1 to 1.4. The age structure in these A third form represents the countries is evolving to an world’s developed countries, inverted pyramidal shape. The where fertility rates have fallen shape projected for Italy in 2030 below replacement levels of 2.1 is depicted in Figure 2. children to 1.8 or 1.6, and where longevity has increased

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There are some exceptions that Focusing concerns about aging include countries like the United costs more broadly—on States where very high levels of sustaining economic growth and immigration and fertility rates improving living standards— that are at replacement have recasts the problem of aging as a helped to maintain a younger labor supply issue. Indeed, over and growing population. China the coming decade, the is an outlier in the opposite slowdown in labor supply direction with a less developed growth will become a significant economy but very low fertility, drag on economic growth, so that the evolving age structure especially in countries like resembles more developed France, Germany, and Spain. countries. Dr. Scheiber highlighted the conclusion of a European One implication of these trends Commission report of a long- is that many countries will term analysis of the evolution of experience an increase in the various world economies. aged and dependent population, Whereas, in 2000 the European while simultaneously seeing a Union accounted for about 18% decline in the working age of world gross domestic product population. Although pension (GDP), by 2050 that is expected systems around the world are to fall to around 10%. Japan organized in numerous ways, all accounted for 8 percent in 2000, constitute mechanisms whereby and that is expected to be halved a portion of the goods and by 2050. The U.S. is expected services produced by workers to continue to grow somewhat find their way to older people over that period, so our situation who have completed their is quite different from that of working careers. With fewer other developing countries. workers, there will be increasing financial stress on pension In simple terms, GDP growth systems within aging countries. rate depends on labor growth Although pressure on pension rate and productivity. Using systems is a concern, Dr. GDP per capita as an indicator Scheiber also suggested that the of living standard, historically aging phenomenon goes beyond most countries have had steadily the structure and financing of increasing standards of living government pension programs to along with growing labor force larger concerns about falling participation rates. The question productivity and standards of emerges: with a potentially living. shrinking labor supply, how much productivity is needed to

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maintain and to continue to tractable. One such trend is the improve standards of living for decreasing age of retirement the combined population of around the world. The average workers and retirees? Scheiber age at retirement varies across noted that if we do not countries from as low as 58 in experience significant increases Belgium. The average in the in productivity, we may U.S. is 62. Dr. Scheiber noted eventually see an effect on living “the most significant reason for standards. these variations in retirement patterns is the structure of the The way that pension systems in retirement systems.” Policies most countries are structured can be pursued that encourage Over the coming may insulate retirees from the older workers to remain in the decade, the slowdown effects of economic slowdown, workforce longer. leaving workers to bear the in labor supply growth costs. With the skrinkage in Another trend is increasing labor supply, the primary factor female participation in the labor will become a driving economic growth will be force. Where these rates have significant drag on worker productivity. However, leveled off, policies could be workers may become less pursued that focus on attracting economic growth. motivated to increase more women into the labor productivity when they see force. An important point, as themselves losing ground in well, is that women who are in their own living standard the labor force tend to retire at compared to retirees. Several younger ages than men, so countries have sought to protect another focus could be on workers to some degree by closing the gap between male indexing benefit levels to prices and female retirement ages. A instead of wages. In that third option is to focus on context, real concerns emerge increasing the labor supply of about decreasing living young adults. Obviously, these standards for the elderly. Dr. policy options are likely to work Scheiber offered a more most efficiently in concert. optimistic vision of the future. He proposed that nations pursue Dr. Scheiber also emphasized policies that sustain economic the potential role of increasing growth, which would benefit all immigration as a means to sectors of the population. expand labor supply in countries

where it is shrinking. Again, as

Besides declining fertility, there a stand-alone, this is not likely to are other trends that affect labor solve global aging problems. supply that may prove more

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If countries cannot achieve the For example, public retirement labor force growth needed to programs in many countries offset the effects of aging actually impose significant tax populations, another alternative penalties on workers who is to find ways to enhance continue working past the

productivity. Dr. Scheiber normal retirement age. In

contended that there are a addition, pay-as-you-go systems

number of ways to work toward may create efficiency losses. Dr. this end. One way is to seek to Scheiber suggested that this is promote capital investment. partly due to the widening gap However, in the case of Japan, between the contributions as the capital stock has workers pay into these programs increased, net rates of return and the benefits they can expect have fallen. We can also make to receive. As a result, many investments in human capital. countries are shifting to funded

There are opportunities to better schemes. Funding public

manage human capital to pension plans and privately

maximize productivity—for investing the assets would example, building incentives for increase saving and investment workers. Technological advance and likely boost productivity. holds promise, as well, but is less predictable. In addition, In various reform proposals, the industrialized economies have burden of the cost of the reform the opportunity to export capital is born differentially. In their to countries where there is a report, Scheiber and Nyce

growing supply of workers. conduct a series of policy

Scheiber noted that these experiments where they test

countries could also bring back various scenarios to see who is returns to their own economy in made relatively better off. In terms of goods and services that one scenario, they assume that will be needed to meet the retirees are given benefits that consumer demands of an aging are increased at the rate of population. growth of productivity. They are protected relative to what It is important to focus attention workers can produce. The

on the structure of pension residual is distributed to

systems, especially when they workers. What they find is that

may be contributing to the in a number of countries, problem. In particular, the workers will begin to fall short designs of pay-go pension of realizing the benefits of their systems often include perverse own productivity. incentives.

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When the reverse is enacted, so Conclusion that workers are protected for As a result of population aging, their own productivity, Scheiber the industrialized nations face a and Nyce find that the elderly’s considerable economic standard of living may actually challenge. The macroeconomic decline relative to absolute challenge will be to carry levels that have already been forward the improving standards achieved. of living achieved so far and to allocate improvements equitably “What would happen to They then turn to alternative across various segments of the scenarios that combine strategies population. Scheiber and Nyce some of these base to balance the burden of reform propound an approach that improvements in our across generations. They pose focuses on promoting and the question: “What would sustaining economic growth. economic productivity if happen to some of these base While policies that promote we could get people improvements in our economic economic growth in their own productivity if we could get right help support rising living across developed people across these developed standards, higher productivity economies to at least work at the can also increase the scope of economies to at least rate of work achieved in the top public budgets to finance public work at the rate of work five economies?” pension benefits. Policies that entice higher labor force achieved in the top five To test this, Scheiber and Nyce participation can help as well to economies?” developed a scenario in which offset potential deterioration in the labor force participation rates retirees’ living standards without of women, the elderly, and placing an undue tax burden on younger individuals would rise workers. to the equivalent of the average rates across the five countries in the Organization for Economic Cooperation and Development (OECD) with the highest rates. They found that this would create an ample labor supply to maintain living standards into the future.

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Discussants Finally, Dr. Gramlich suggested that the move toward more Edward Gramlich, a member funded pension systems makes of the Board of Governors of the sense—that one thing to do Federal Reserve, was the first to when there are fewer workers

offer commentary on Scheiber relative to retirees is to equip the

and Nyce’s report. Dr. Gramlich workers with more capital,

first commented that one which a funded system would implication of the report is that it do. He also endorsed the value highlights that a sensible pension of encouraging older workers to One thing to do when system depends on many factors, remain in the labor force, most of which are discussed in especially as average life there are fewer great depth in Scheiber and expectancies continue to workers relative to Nyce’s report. Unfortunately, increase. pros and cons of various pension retirees is to equip the systems are hotly debated on Alan Gustman, Loren M. ideological grounds and in Berry Professor of Economics at workers with more practice. The report, Dartmouth College and a capital, which a funded constructively, encourages member of the Executive policymakers to focus on Committee for the MRRC, stated system would do. empirical and analytical issues in that the analytical accounting considering the merits of one or framework presented by another approach. Scheiber and Nyce is extremely A second point is that, because important for establishing of the myriad of economic and baseline information about demographic factors affecting where we stand as we look pension systems, the ideal across countries. Dr. Gustman pension system would be some suggested that we can use this

sort of “mixed system” that baseline to go forward to include

would be robust to many behavioral responses and policy different forces. rules. Data limitations have hindered this effort in the past. Dr Gramlich underscored the However, with several datasets importance of international coming on-line now across a capital flows and the virtue of number of countries, this may international trade. The report become feasible. Dr. Gustman makes a contribution by stressed the importance of encouraging policymakers structural modeling, which

worldwide to consider the merits allows researchers to capture

of immigration in rectifying deeper structural parameters in labor shortages. predicting retirement outcomes.

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Richard Jackson, Senior account in some way what these Fellow at the Center for groups are doing outside of the Strategic and International paid labor force, how productive Studies (CSIS) and Director those activities are, and how of the Global Aging Initiative, they may contribute to standards noted that, as the speaker and of living. For example, some other discussants suggest, a retired grandparents may be combination of several sensible providing unpaid childcare that adjustments in the U.S. makes allows both parents, or a single the outlook for pension parent, to be in the paid labor financing quite good but that the force. situation in Europe and Japan is far more dire. Maintaining the Dr. Shoven sought to broaden status quo in these countries in the discussion by raising the the coming decades would question of how we define old virtually erase any real growth in age and who is elderly. He living standards. introduced into the discussion the concept of remaining life Dr. Jackson agreed that in expectancy as a potentially themselves no one of the reforms better measure of age than mere mentioned by Dr. Scheiber chronological age. Comparing would be enough. Certainly 65 year-olds today and 65 year- extending working lives is an olds in 2050 is like comparing obvious and necessary reform. older and younger people. He supported the report’s Therefore, a better accounting emphasis on prefunding social method might be to count only insurance and suggested that the those people as old who have a success of pay-as-you-go short remaining life expectancy. systems in the past is not likely This way of accounting may to continue into the future, even ultimately lead to policy in the U.S. where labor and conclusions similar to those productivity growth are reached by Dr. Scheiber. reasonably robust. Anticipating later presentations,

John Shoven, Professor of Dr. Shoven also raised the issue Economics at Stanford of potential asset meltdown that University and Senior Fellow at could occur as populations age. the Hoover Institute, pointed out In simple terms, as retirees that, as we encourage greater liquidate their private pension labor force participation of the retirement assets, there may not young, elderly, and women, it be enough buyers and asset may be valuable to take into values will depreciate.

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Session II: Topics for consumption. An aging society Future Research on has relatively few workers for Global Aging: the existing capital stock that Discussion of Two produces consumption goods for Reports a still relatively large number of consumers. Global Aging: Issues, Answers, and More Labor Supply Questions Labor supply is determined by Axel Börsch-Supan, Director demographic factors and labor of the Mannheim Research force participation rates, which Institute for the Economics of is one factor affected by Aging and Professor of government policy. Dr. Börsch- Economics, Macroeconomics, Supan noted that most countries and Public Policy at the have produced projections of University of Mannheim, labor supply, but these provided a review of reforms projections depend on different underway in Germany to address assumptions and there are no problems that arise from aging. good compilations that allow He also reviewed several cross-country comparison. research areas of relevance, and Analysis of the impact of global he identified topics that merit aging would benefit from a more further research. systematic approach to this fundamental input. Dr. Börsch-Supan characterized the problems posed by global Employment also depends on aging in much the same way as labor demand. Börsch-Supan Dr. Scheiber. He noted that contends that aging economies understanding the evolution of must maintain an elastic labor

the labor force in the coming supply. Aging creates changes

decades is crucial for any in the types of products

analysis of global aging because demanded and therefore in the

long-run macroeconomic labor needed.

development is dominated by

fundamentals such as the relative He provided statistics on the

scarcity of labor and the relative economic dependency ratio, the

abundance of capital. The number of pensioners relative to

workers. These figures are essential macroeconomic effects much higher in Europe than in of population aging are a the U.S. For example, in changing balance between Germany labor force capital and labor, and between participation will decline labor supply and demand for

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dramatically. To compensate for working groups and how they the lack of workers, productivity interact. This is an important would have to increase by about and open area for further 40%, which is unlikely without research. major efforts. Dr. Börsch-Supan offered that it is important to Interactions between Labor, better understand how public Product, and Capital policy can influence labor force Markets participation. Pension reforms As mentioned above, labor and education reforms can have supply may have to adapt to potentially huge effects on GDP changing product demand. Dr. growth through their impact on Börsch-Supan provided evidence The essential employment, rather than just on that consumption behavior their often discussed impact on changes with age. For example, macroeconomic effects social budgets. He underscored German data show that spending the fact that policies affecting on transportation and of population aging are employment are crucial in communication falls with age, minimizing the economic effects while health and hygiene a changing balance of population aging. account for a growing share of older household budgets. between capital and Labor Productivity Changing product demand will In addition to size, the structure create shifts in labor sector labor, and between of the labor force will also demands. Dr. Börsch-Supan change, growing increasingly estimated that overall increases labor supply and older over time before flattening and decreases in employment out. It is not clear what affect amount to a total of 18 percent, demand for this graying of the workforce suggesting that a sixth of all will have on productivity. workers will need to change consumption. Results based on cognition their jobs due to population measures leaving out experience aging. are just as unconvincing as results based on a fixed job However, research on age- ignoring typical career paths. related consumption patterns is More research on age-specific limited by cross-sectional data, productivity is clearly needed to which entangle age, cohort, and better understand whether aging time effects. Such differences economies will suffer from a can be discerned with panel data productivity decline, now becoming available. exacerbating the effects of a shrinking labor supply. Research of this kind is expensive because it requires firm data, looking at

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Capital Markets retirement savings largely Capital markets are important unnecessary. And if other for global aging for at least two savings motives predominate, reasons. First, capital moves such as precautionary savings or across countries more easily the desire to leave an

inheritance, there is likely to be than labor. The relatively less dissaving in old age. easy flow of capital across countries allows the diversification of demographic In the Netherlands, however, risks. Second, capital markets where there are mandated allow the shifting of resources savings plans and a smaller over time periods and even over portion of retirement income

generations. Dr. Börsch-Supan comes from the pay-as-you-go

emphasized that this is one of public pension, we do observe spending down of private the strengths of funded pension savings in old age. The systems. implication for pension reform is

There are a variety of important that countries that move toward research questions that relate to a multi-pillar system may revive the impact of global aging on private retirement saving capital markets. One set of motives. To estimate the impact questions relates to the supply of of this type of reform Borsch-

savings. Do public pension Supan conducted a simulation to

systems, in effect, crowd out project aggregate saving in Germany under a fundamental private savings, and do reform plan. He showed that retirement savings affect other optimal life-cycle behavior types of saving, for example, saving for a home? generates additional saving, and that eventually about one-third More generally, does global of retirement income will come aging reduce the supply of from the funded pillar. global capital? The life-cycle

hypothesis predicts saving in Another set of questions relates

youth and spending down in old to international diversification mentioned above. In particular, age. Dr. Börsch-Supan reviewed we do not have reliable models findings that show relatively flat of international capital market saving profiles in France, Germany, and Italy. One flows, so we do not know the possible explanation is that the extent of friction, such as that high replacement rates of public caused by “home bias”—the pension systems in these tendency of investors to hold countries have made private only domestic rather than

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international equities. It is not and risky assets. As countries yet fully understood why move toward more prefunding of households do not optimally pension systems, it will be diversify their portfolios across important to better understand countries. More research on how the rates of return of safe capital market frictions will help and risky assets are affected by policymakers to better global aging. understand how international diversification might alleviate Since capital markets will play More research on the negative impact of global an important role in global aging. aging, it is also important to capital market frictions understand more about which Dr. Börsch-Supan also addressed form of corporate governance will help policymakers the question of asset meltdown will be most likely to offset and suggests that because of some of the negative effects of international diversification, aging. For example, France, better understand how predictions about melt down Germany, and Italy—the three may be as dire as is described in largest economies in continental international models of closed economies. He Europe—have large pay-as-you- reviewed findings which show go public pension systems, but diversification might that there is likely to be a very thin capital markets, decrease in the rate of return, but meaning that only a few alleviate the negative the open economy will suffer households own and control less severely. He also showed productive capital. In addition, impact of global aging. that if fundamental pension they have quite poor rates of reform were enacted in return. Börsch-Supan noted that Germany, the decreased rate of many authors claim that an return would be much less in an important cause for this open economy. He noted that underperformance is weak household saving induced by corporate governance. He cited pension reform should be some preliminary evidence invested internationally, not only which shows that actively

managed investments by for risk diversification, but also for higher returns. institutional investors enhances corporate governance, and Dr. Börsch-Supan proposed that through this channel increases an open area for research is in productivity and growth. better understanding portfolio choice behavior, in particular the equity premium puzzle—the larger than predicted rate of return differential between safe

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Conclusion Lastly, the international flow of Dr. Börsch-Supan concluded by capital is not perfectly smooth. noting that global aging will Understanding impediments to affect labor, product, and capital the free flow of capital, the markets in fundamental ways, sources of instability in global

which will eventually change the financial markets, and the kind

wealth of nations. While we of policies that are appropriate to

understand the basic reduce friction and instability are mechanisms behind these important and highly policy changes, he proposed that there relevant research areas for global is much work to be done to aging. improve our knowledge of feedback effects and to generate The Impact of Aging on more precise quantifications. Financial Markets and the Economy: A Survey Capital markets can Public policy can influence Barry P. Bosworth, Senior diversify the risks labor, product, and capital Fellow in Economic Studies at markets at a microeconomic generated by labor the Brookings Institution and level. The main policy tools, he Ralph Bryant, also Senior scarcity and can thus contends, to utilize potential Fellow in Economic Studies at labor sources are retirement and the Brookings Institution be thought of as education policies that would get presented their work with Gary strategic. younger people into the labor Burtless that addresses a market sooner and keep older number of questions about the workers in longer. impact of aging on financial

markets and the economy. The

Capital markets can diversify the first part of their discussion risks generated by labor scarcity focused on the research literature and can thus be thought of as on savings and investment; the strategic. The supply of capital is second half considered these directly influenced by pension issues in the context of an open policies that foster savings. economy. However, we do not fully understand the interactions The authors emphasized two between pension policy and important trends that will

economic growth. Policies such emerge as a result of population

as prefunding and privatization aging. First, there will be appear to have significant shrinkage of the labor force in beneficial effects on economic some industrialized countries growth rates—good news in and a slowdown in growth of times of global aging. labor supply in others. One outcome of these trends will be a

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reduction in domestic investment Saving Within a Single opportunities because employers Nation will have less need to provide The first question the authors new equipment and facilities for addressed is whether the additional workers. Second, literature supports the there is the potential for predictions of the life cycle disruptions of asset markets as model regarding the impact of large numbers of retirees begin the changing age structure on to liquidate their retirement aggregate household saving. assets. Dr. Bosworth offered The life-cycle model posits that that an important question for individuals will save during their the global economy is: which working years and spend these will decline more, investment or savings during retirement to saving? The imbalance between maintain their standard of living. the two defines the current Thus, the aggregate saving rate account balance. A practical depends critically on the relative upshot is that if the domestic size of different age cohorts in demand for investment funds the population. Subsequent falls faster than saving in research has expanded the model industrial economies, these to include the influence of funds may flow to parts of the factors that could alter the basic world where demand is higher, prediction. Such variables namely, developing countries. include uncertainty, liquidity constraints, and the desire to On the other hand, larger leave a bequest. declines in national savings in the industrial economies, implies Dr. Bosworth discussed their that these countries will need to review of the empirical evidence sell assets to the rest of the world across micro and to sustain consumption. This macroeconomic analyses has raised concerns that one showing that, in general, saving effect of population aging will rates are affected by age and by be a global shortage of capital. the age profile of the population. It may be that increasing The majority of studies that globalization can mitigate these evaluate the life cycle hypothesis negative effects. In reviewing have been based on evidence at the literature in this area, the the household or individual authors organized their findings level. Although the empirical around four sets of questions, results largely conform to the which Drs. Bosworth and Bryant predictions of the model, they addressed in turn. also suggest that the overall effect of demographic shifts will

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be small. The magnitude of of countries included in the dissaving (spending of saved analysis. The question of assets) during retirement is whether population aging is small. In fact, a notable fact going to lead to a saving surplus found across studies is that many or shortage is highly significant people reach retirement with for the global economy; yet the little or no savings at all. answer remains elusive. A careful study of panel data for a In contrast, macroeconomic large sample of countries using studies, which often rely on aggregate data holds promise for cross-national panel data, have improving our knowledge of the found stronger effects of aging effects of population aging. on aggregate saving. There are a Aggregate data across many variety of reasons for this countries offers more variation divergence of results across in age structure over time and micro and macroeconomic can deal correctly with pensions. studies. One complication is The alternative is to improve that the distribution of wealth microeconomic data to and saving across households is incorporate defined benefit highly unequal. A small accruals as part of saving. percentage of households account for a large share of Domestic Investment and wealth, and the behavior of these the Saving-Investment households is not captured in Balance most individual or household surveys. If their saving behavior Relative to effects on saving, differs significantly from that of little research attention has been average households, the effect of paid to the effects of the the age distribution on aggregate changing population age saving may differ from the effect structure on rates of national implied by the behavior of the investment. Yet the potential median household. Another impact might be just as potential reason for the important. A standard model of discrepancy may be that the economic growth posits that microeconomic analyses often growth in output is determined fail to incorporate fully pension by growth in the size of the labor fund saving. force, technical change, and increase in capital per worker. They show that the results of the Capital stock should increase studies reviewed are highly with output to avoid an increase sensitive to variations in model in the rate of return. Growth in specification and to the sample output and capital stock is a

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function of labor force growth research design and data and technical change. Dr. employed. Bosworth, however, noted that little research has been done to Panel data for a large sample of examine the potential link countries might generate more between labor force growth and refined estimates of technical change. It may be that demographic effects. Future rapidly increasing technical research in this area may also change could offset the benefit from examining data for shrinkage of the labor force. private and public-sector The effect of investment disaggregated by Empirical studies have used industry. This could be useful in demographic change time-series or cross-national assessing whether saving and on asset returns differences in the timing of investment demand are in sync demographic change to infer the or not. For example, if the depends on whether effects of population aging. Dr. elderly demand a lot of capital in the saving-investment Bosworth cited studies which the form of big houses and tend to show that slower labor hospitals with high-tech equilibrium produces a force growth associated with equipment, then investment population aging will reduce the demand would be stronger. It is faster increase in the demand for domestic also important to further explore capital stock relative to investment. This may offset part the linkage between labor force or all-of-the decline in domestic growth and technological change labor supply. saving. Higgins has done much because the rate of technological of this work and has shown that change is an important the decline in investment would determinant of the demand for be greater than the decline in capital. Some suggest that an saving projecting out to 2025, aging labor force might be less with industrial countries ending innovative, but other studies up with current account suggest the opposite might be surpluses. Bosworth and others true. Clearly more work is replicated this analysis, needed in this area. extending it to 2050, and found that current account balances of Asset Prices and Relative high income countries could be Returns negative, when the decline in The third set of questions national saving exceeds the drop addressed the potential influence in domestic investment. Dr. of the population age structure Bosworth noted that this on financial markets. demonstrates how sensitive Specifically, Dr. Bosworth findings in this area are to reviewed research evidence on relatively modest changes in the

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the effects of future aging on measurable impact of asset prices. The effect of demographic swings was demographic change on asset reflected in home prices. The returns depends on whether the two-decade rise in home prices saving-investment equilibrium starting in the late 1960s was

produces a faster increase in the mainly driven by the entry of the

capital stock relative to labor baby boom generation into ages

supply. If this is so, the real rate in which housing demand rises. of return on capital will fall. A They forecast a long-term second mechanism through decline in housing prices after which population age structure 1980 when the population past can affect assets is through the 40 would become relatively differential relative demand. large compared to 20 to 40 year If workers systematically vary olds. Of course, housing prices their investment portfolios as have risen steadily in the 1990s,

they age, and if potential age- suggesting caution in making

related preferences remain projections of this sort.

steady over time, shifts in the age composition of the Other empirical studies have population could have effects on examined portfolio allocations as the demand for different kinds of a function of age, but have found assets. that the data do not conform to either popular investment advice Dr. Bosworth cited a study by (which recommends investors Mankiw and Weil from 1989 reduce the portfolio share of

which used housing to illustrate risky assets as they age) or with

this point. These researchers the optimal portfolio path found that most of the suggested by the Merton-

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Samuelson theory (in which the similar countries, like the United optimal portfolio is independent States and Canada. of an investor’s age). Figure 3 shows results of work by Poterba The strongest evidence for an which illustrates this fact. effect of demographic change on Measured as a percentage of net asset prices comes from worth, equity investments microeconomic studies, but represent an increasing share of microeconomic surveys lack portfolios through age 55-59 and crucial information about asset slightly decreasing share demand. In particular, Dr. thereafter. This demonstrates Bosworth asserted that assets that investors do not tend to held in employer-sponsored shield themselves from risky defined benefit pension plans assets at older ages. Other work should be included in the by Poterba tends to support the estimates, even if data claim that age structure is an imputation is required. important determinant of U.S. stock market prices, but results Open-Economy Aspects of are inconsistent across countries the Saving-Investment studied. Dr. Bosworth also cited Balance the work of Davis and Li, which Dr. Bryant addressed the last, extended Poterba’s work to but perhaps most complicated, of include a larger number of the three sets of questions: how countries. It found evidence of should increasing global demographic effects on asset integration affect our prices, but results were interpretation of the effect of extremely sensitive to model demographic changes on a specification and in some were nation’s saving-investment cases opposite to what Poterba balance? He began by offering found. some background which shows that increasing global integration Overall, analysts have found has linked macroeconomic inconsistent evidence of an variables across national borders effect of population age structure more closely today than was the on asset prices and returns. The case in the past. This means that effects of demographic factors more of the macroeconomic are sensitive to the start and end adjustment to shocks is going to dates of the period analyzed and occur through external sector to the countries included in the transactions and exchange rates sample. Researchers have found than was true before. According that estimated demographic to Dr. Bryant, this suggests that effects have the opposite sign in

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the gap between national saving investment and national saving and domestic investment ought has fallen sharply within the to fluctuate more than before. European Union as economic integration has risen. Research first triggered by Dr. Bryant noted that Feldstein and Horioka has demographic transitions repeatedly demonstrated that occurring in countries vary there is a high correlation in widely in their pace and cross-country data between intensity. Because of this, the saving and domestic investment. macroeconomic evolutions of Interpretation of this correlation individual countries are strongly has been controversial with influenced by external-sector some emphasizing the fact that transactions and exchange rate there are still significant barriers changes. He cited research at borders and that capital showing that countries with markets are imperfect. Given faster aging have an appreciation National capital this, we might expect the of their currency, an correlation to remain high. improvement in their terms of Another interpretation is offered trade, a current account surplus, markets are far from by Taylor, who suggests that the and a build-up of a net foreign need for nations to satisfy inter- asset position. In short, fully integrated. temporal long-run budget investment declines more than constraints may help explain national savings, yielding these why any one nation would effects. These changes partly exhibit this correlation. cushion rapidly aging economies from their larger demographic Other research seems to confirm shocks; the openness of their that national capital markets are economies works to mitigate the far from fully integrated. negative consequences for Specifically, Dr. Bryant domestic output and production. explained, domestic residents The obverse will likely be true tend to invest a disproportionate for countries that are aging more share of their net worth in slowly. domestic assets despite potentially higher rates of return Dr. Bryant concluded his on foreign investments. remarks by previewing his However, recent evidence tends current work with colleagues in to show that this home bias is the Brookings/Australian weakening somewhat as cross- National University (ANU) border integration has continued research team. Reflecting the to increase. For example, the thinking of the team of correlation between domestic

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scholars, he proposed that cross- the kinds of macro-economic border and global issues about analyses presented as well as the consequences of emphasizing their great demographic change are best importance for policy. She addressed within a general suggested that it is important to equilibrium framework that keep in mind the question of incorporates endogenous inequality within and across macroeconomic interactions countries. For example, the among national economies. notion of the crowding out of Without it, research studies savings by pension policies may cannot adequately capture make sense in the aggregate but spillover effects from one may have important national economy to another and distributional impacts. Her the net consequences for global comments emphasized the savings and investment. He importance of keeping the acknowledged that this is discussion of how vulnerable difficult and slow-moving work populations will be treated in the for a variety of reasons. forefront as reforms are enacted.

Improved empirical research on Dr. Moon also addressed the capital flows and the cross- issue of retaining workers in the border aspects of countries’ labor force longer and suggested saving-investment balances, researchers think in terms of Bryant acknowledged, is limited what kinds of labor are going to very significantly by the lack of be required in an aging society. appropriate data. He concluded She noted that health care is his remarks by outlining some of another aspect of global aging the strengths and weaknesses, that is intertwined with the which are discussed in detail in problems of public pension their paper, of the model the systems. She suggested that we team is developing. need to deal with costs in a broader context. Health benefits are not unrelated to the question Discussants of longer work lives.

Marilyn Moon, Vice President Moritz Kraemer, Director of

the Sovereign Ratings Group at and Director of Health Programs at the American Institutes of Standard and Poor’s (S&P), Research, offered comments pointed his comments to what from a microeconomic point of aging means for public finances. view. She began by Dr. Kraemer shared the results acknowledging the difficulty of of a recent study S & P had

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undertaken to project future period net worth. This second credit ratings. The study measure includes capital gains. concluded that within the next The corresponding measure of 25 years, if no reform is investment includes NIPA undertaken, aging will have such investment (i.e., production of

a large impact on some new capital goods) plus price

European countries that the appreciation on existing capital.

triple A rating of those nations Needless to say, the empirical will be all but extinct. He difference between the two suggests that the policy approaches has been great in the implication is for nations to last decade – which saw first improve fiscal performance as large positive, then large much as possible and as soon as negative, capital gains. A possible. He also suggests that it comprehensive model must is important not to overstate the provide an interpretation of the

role that increased exports can difference, and, in fact, the

play in offsetting the shortfall in literature suggests several

domestic demand plausible stories.

Andrew Abel, Professor of Professor Abel bases his Economics at Wharton, discussion of a possible “asset discussed several aspects of the melt down” on an interpretation day’s presentations, focusing of capital gains in which the especially on concerns about so- price of new investment goods called “asset meltdown.” rises when new investment is

high relative to the existing

First, Professor Abel noted that capital stock. In his story, as the

in previous discussions of saving Baby Boomers near retirement, and investment, one could think they save heavily. This leads to a of several different measurement period of high domestic approaches. The most common investment; hence, the price of follows the National Income and new investment goods rises. The Product Accounts (NIPA): latter rising price generates domestic investment equals GDP capital gains on existing capital. less domestic consumption and Soon, however, the Baby

net exports; domestic saving Boomers will retire in large

equals residents’ income less numbers. Aggregate saving will

their consumption. Another then fall; in fact, the retirees may approach defines domestic begin to dissave. If falling

saving as the difference between saving leads to reduced domestic

residents’ end-of-period net investment, the price of

worth and their beginning-of- investment goods should fall –

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leading to a period of capital Conclusion and Wrap-Up losses on existing capital. This would be an asset meltdown John Laitner closed the story: as Baby Boomers retiree proceeding by thanking the and seek to liquidate their participants and emphasizing the savings, they will find their net value of this kind of interaction. worth lower than they had hoped The challenges and opportunities because of capital losses. of the global economy define our common future. Research that Professor Abel then extended his explores the impact of the aging analysis to an open economy. In population on the global particular, he asks how the economy will continue to be recent very rapid growth in relevant and necessary well into China might change the outcome the future as policy makers predicted above. He concludes grapple with these challenges that a high rate of new and embrace the opportunities. investment accompanying the rapid growth of output in China may sustain a relatively high price for new investment goods worldwide. This would block the capital losses predicted in the closed-economy model of the previous paragraph, thereby conceivably preventing an asset meltdown. He concludes that many difficult and controversial elements remain in this analysis and that more research is needed.

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Andrew B. Abel is the Ronald and leads the special research Biographies A. Rosenfeld Professor of group on behavioral economics Finance at the Wharton School, (SFB504). He is member of the a Research Associate of the Berlin-Brandenburg Academy of National Bureau of Economic Sciences and the German Research, a member of the Academy of Sciences Advisory Committee of the “Leopoldina”. Carnegie-Rochester Conference Series, and a member of the Barry Bosworth is Senior Panel of Economic Advisors and Fellow in the Economic Studies the Long-Term Modeling Group Program (the Robert V. Roosa of the Congressional Budget Chair in International Office. His major fields of Economics) at the Brookings interest are macroeconomics and Institution in Washington D.C. asset pricing. His textbook, where his research has involved Macroeconomics, co-authored work on the determinants of with Dr. of economic growth in developing , is widely countries, saving, and capital used at colleges and universities formation. In addition, his around the world. He received current projects include a study an A.B. in Economics summa of the economic consequences of cum laude from Princeton population aging, productivity University and a Ph.D. in growth in U.S. services- Economics from the producing industries, and a study Massachusetts Institute of of policies to promote economic Technology. growth in Puerto Rico. Mr. Bosworth has been a Senior Axel Börsch-Supan is Fellow since 1979 and served as Director of the Mannheim a research associate from 1971- Research Institute for the 77. He was Director of the Economics of Aging (MEA) and President’s Council on Wage Professor for Macroeconomics and Price Stability in 1977-79; and Public Policy at the Visiting Lecturer at the University of Mannheim, University of California, Germany. He is chairman of the Berkeley, 1974-75; and Council of Advisors to the Assistant Processor, German Economics Ministry, , 1969-71. He co-chaired the pension reform received his Ph.D. from the group of the German social University of Michigan in 1969. security reform commission, coordinates the EU-financed Ralph C. Bryant has been a Survey of Health, Aging and Senior Fellow in the Economic Retirement in Europe (SHARE),

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Studies program of the Brookings Governors of the Federal Institution since 1976. His primary Reserve on November 5, l997, to fields of expertise are international fill an unexpired term ending economics, monetary economics, January 3l, 2008. Prior to this, and macroeconomic policy. Prior Dr. Gramlich served as Dean of to joining Brookings, Bryant was the School of Public Policy at Director of the Division of the University of Michigan from International Finance at the l995 to l997. He also served as Federal Reserve Board and the Professor of Economics and international economist for the Public Policy at the University Federal Reserve's Federal Open of Michigan (l976-97), Chair of Market Committee. He has the Economics Department frequently participated in advisory (l983-86) (l989-90), and groups and served as consultant to Director of the Institute of Public organizations such as the Federal Policy Studies (l979-83) (l99l- Reserve, the U.S. Treasury, the 95). Dr. Gramlich has extensive Congressional Budget Office, the governmental experience. From World Bank, the IMF, the OECD, l994 to l996 he served as Chair and the National Science of the Quadrennial Advisory Foundation. Bryant's latest book is Council on Social Security, a Turbulent Waters: Cross-Border body established to examine the Finance and International actuarial finances of social Governance (Brookings, June security and to suggest policy 2003). He is currently working on changes. In l986-87 Dr. three companion essays to Gramlich was both Deputy and Turbulent Waters, each addressing Acting Director of the specific aspects of pragmatic Congressional Budget Office. choices for international financial He also served as Director of the governance. The first volume, Policy Research Division at the Crisis Prevention and Prosperity Office of Economic Opportunity Management for the World (l97l-73), Senior Fellow at the Economy, will be published in Brookings Institution (l973-76), June 2004. Bryant received his and in the Research Division at bachelor's degree from Yale the Federal Reserve Board University in 1960. As a Rhodes (l965-70). Dr. Gramlich also has Scholar, he received a B. Phil a strong research record, on a degree in Economics from Oxford wide range of issues. In l992 he University in 1963. In 1966, he was the staff director for the was awarded a Ph.D. in Economic Study Commission of Economics from . major league baseball. He is in his second edition of a popular Edward Gramlich took office text on benefit-cost analysis, and as a Member of the Board of has also authored several other

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books and many articles on Slovenia, and Russia. He has topics such as macroeconomics, published extensively in a budget policy, income number of areas, relating redistribution, fiscal federalism, principally to fiscal policy, social security, and the economic development and economics of professional poverty reduction, aging sports. populations, public expenditure policy, health care reforms in Alan L. Gustman is the Loren developing countries, pension M. Berry Professor of and civil service reform, climate Economics at Dartmouth change, privatization, and College, joining the faculty in globalization. In recent years, he 1969. He is also a Research participated in the World Health Associate at the National Bureau Organization’s Commission for of Economic Research (NBER) Macroeconomics and Health and in their programs in Labor the Millennium Task Force of Studies and Aging, serves as a the United Nations. Author or Co-Principal Investigator of the Who Will Pay? Coping with Health and Retirement Study Aging Societies, Climate Change (HRS) and is a member of the and other Long-Term Fiscal Executive Committee of the Challenges University of Michigan Retirement Research Center. Richard Jackson is currently For almost two decades, a senior fellow at the Center for Gustman's research has focused Strategic and International on four central issues in labor Studies (CSIS), where he directs economics and the economics of the Global Aging Initiative, a aging: retirement, pensions, research and educational Social Security and saving. program devoted to exploring the long-term implications of Peter S. Heller was Educated population aging. Jackson is at Trinity College (USA) and also an adjunct fellow at the received a Doctorate in Hudson Institute and a senior Economics from Harvard advisor to the Concord University. He taught economics Coalition. Jackson is the author at the University of Michigan in of numerous policy studies and Ann Arbor from 1971-77. Since is widely quoted in the national then, he has worked for the IMF, and overseas media. He holds a working largely on fiscal policy B.A. from SUNY at Albany and issues in countries as diverse as a Ph.D. in economic history China, India, Somalia, Thailand, from Yale University. Japan, Ethiopia, Korea, Kenya, Indonesia, Israel, Jordan, Bosnia,

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Moritz Kraemer joined Standard Links,” ch. 5 of Handbook of & Poor's in February 2001 as a Population and Family Director in the Sovereign Ratings Economics, North-Holland, group, where his primary 1997; “Earnings within responsibility is the coverage Education Groups and Overall of Europe. From 1996 through Productivity Growth,” Journal of 2001 he was an Economist with Political Economy, August the Inter-American Development 2000; “Secular Changes in Bank in Washington DC, working Wealth Inequality and with governments in Latin Inheritance,” Economic Journal, America in the design and October 2001; and implementation of economic “Technological Change and the policy reforms (mainly fiscal Stock Market” (with D. reform and decentralization). He Stolyarov), American Economic holds a Ph.D. in Economics from Review, September 2003. He the University of Göttingen received his Ph.D in economics (Germany), where he was a from Harvard. researcher and lecturer at the Ibero-America Institute of Marilyn Moon is Vice Economic Research and the President and Director of the Faculty of Economics from 1992 Health Program at the American through 1996. He studied Institutes for Research. She is a Economics, Latin American nationally-known expert on Studies and Literature in Medicare. She previously served Frankfurt, Southampton and San as a Senior Fellow at the Urban Diego. Institute and as a public trustee for the Social Security and John P. Laitner is Director of Medicare trust funds. Marilyn the Michigan Retirement Moon has written extensively on Research Center, Senior health policy, both for the Research Scientist at the elderly and the population in Institute for Social Research, and general, and on social insurance Professor of Economics at the issues. Recent publications University of Michigan. His include: “A Place at the Table: research falls primarily in the Women’s Needs and Medicare area of economic theory, in Reform” and “Stretching Federal particular, factors influencing Dollars: Policy Trade-Offs in long-run growth, technological Designing a Medicare Drug change, and the distribution of Benefit with Limited wealth. Among his recent Resources.” Dr. Moon is the publications are the following: Program Director for the “Intergenerational and Commonwealth Fund’s Program Interhousehold Economic on Medicare’s Future. Dr. Moon

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earned a Ph.D. in economics the developed economies of the from the University of world and its economic Wisconsin--Madison. implications that will be Previously, she was an associate published later this year. Dr. professor of economics at the Scheiber has written numerous University of Wisconsin- journal articles and papers on Milwaukee, a senior analyst at retirement and health benefits the Congressional Budget issues. He is a frequent speaker Office, and the founding before business and professional Director of the Public Policy groups and Congressional Institute of the American Committees. Association of Retired Persons.

Sylvester J. Scheiber is vice John Shoven is the Charles R. president of research and Schwab Professor of Economics information at Watson Wyatt at Stanford University. He has Worldwide. He holds a Ph.D. in been at Stanford since receiving economics. He was a member of his Ph.D. from Yale in 1973. the 1994-1996 Social Security Advisory Council and has served At Stanford he has served as on the U.S. Social Security Chairman of the Economics Advisory Board since 1998. He Department, Director of the has authored or edited ten books Center for Economic Policy on changing demographics and Research and Dean of the School retirement security. His book, of Humanities and Sciences. He written with John Shoven of is a Research Associate of the Stanford University, The Real National Bureau of Economic Deal: The History and Future of Research and serves as the Social Security, published by Director of their West Coast Yale University Press in 1999 office. He assumed the won a certificate of merit in the Directorship of the Stanford annual Paul A. Samuelson prize Institute for Economic Policy competition for economic Research in November of 1999. writings in 2000. He recently finished the eighth edition of the Professor Shoven is also on the Fundamentals of Private Board of Directors of Cadence Pensions with co-authors Dan Design Systems. He is a member McGill, John Haley and Kyle of the American Academy of Brown which is being published Arts and Sciences, and has by Oxford University Press. In authored or co-authored more January 2004, he completed a than a dozen books and over one report for the World Economic hundred professional articles. Forum on population aging in His latest books, The Real Deal:

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The History and Future of Social Security (Yale University Press, October 1999) and Should the United States Privatize Social Security? (MIT Press, 1999) were published in the summer and fall of 1999.

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