DIRECTIONS IN DEVELOPMENT Human Development As Time Goes By in Argentina Economic Opportunities and Challenges of the Demographic Transition Michele Gragnolati, Rafael Rofman, Ignacio Apella, and Sara Troiano As Time Goes By in Argentina DIRECTIONS IN DEVELOPMENT Human Development As Time Goes By in Argentina Economic Opportunities and Challenges of the Demographic Transition Michele Gragnolati, Rafael Rofman, Ignacio Apella, and Sara Troiano © 2015 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington, DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved 1 2 3 4 18 17 16 15 This work is a product of the staff of The World Bank with external contributions. The findings, interpreta- tions, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. 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ISBN (paper): 978-1-4648-0530-1 ISBN (electronic): 978-1-4648-0531-8 DOI: 10.1596/978-1-4648-0530-1 Cover art: © Michele Gragnolati, Rafael Rofman, Ignacio Apella, and Sara Troiano. Used with permission; further permission required for reuse. Cover design: Debra Naylor, Naylor Design, Inc. Library of Congress Cataloging-in-Publication Data has been requested. As Time Goes By in Argentina • http://dx.doi.org/10.1596/978-1-4648-0530-1 Contents Abbreviations xvii Preface 1 Chapter 1 Introduction 3 Michele Gragnolati, Rafael Rofman, Ignacio Apella, and Sara Troiano Motivation 3 Demographic Change in Argentina 6 The Economic Life Cycle 12 The Implications of Demographic Change on Economic Growth 16 The Implications of Demographic Change on the Welfare State 18 Poverty across the Life Cycle and the Role of Public Transfers 26 Cross-Cutting Issues and Main Conclusions 28 Structure of the Report 34 Notes 35 References 36 Chapter 2 Demographic Panorama in Argentina 39 Carlos Grushka Introduction 39 Trends and Prospects for the Argentine Population 39 Evolution of the Determinant Demographic Variables in Argentina 42 Implications of the Demographic Evolution on “Dependency” and “Dividends” 55 Annex 2A 60 Notes 67 References 68 As Time Goes By in Argentina • http://dx.doi.org/10.1596/978-1-4648-0530-1 v vi Contents Chapter 3 National Transfer Accounts in Argentina 71 Pablo Comelatto Introduction 71 Why Estimate National Transfer Accounts? 72 National Transfer Accounts Project: Basic Concepts 74 The NTAs in Argentina, 2010 76 Age Profile of Public Transfers and Their Components, 2010 83 Final Reflections 88 Annex 3A 89 Notes 91 References 91 Chapter 4 Public Finance Implications of Population Aging in Argentina: 2010, 2050, 2100 93 Michele Gragnolati and Sara Troiano Introduction 93 Methodology: Age Structure and the Generosity of Public Benefits 94 Projections of Social Spending for Argentina and Comparator Countries 97 Conclusions 108 Notes 110 References 111 Chapter 5 Argentine Social Protection in a Context of Demographic Transition 113 Rafael Rofman and Ignacio Apella Introduction 113 Social Protection in Argentina 114 Social Protection and Poverty 121 Social Protection Beneficiaries in 2010 125 The Impact of Demographic Trends and Public Policy Assumptions 128 Final Reflections 132 Notes 134 References 135 Chapter 6 Aging and Challenges for the Argentine Health Care System 137 Daniel Maceira Introduction 137 Salient Features of the Argentine Health Care System 138 Regional Factors 143 As Time Goes By in Argentina • http://dx.doi.org/10.1596/978-1-4648-0530-1 Contents vii Distribution of Coverage, Determinates of Expenditure, and Projections 149 Policy Predictions 154 Equality and Access to Health Care 162 Final Reflections 166 Annex 6A 168 Notes 172 References 172 Chapter 7 Long-Term Care in Argentina 177 María Eugenia Barbieri Introduction 177 Definition of Long-Term Care 179 Formal Long-Term Care Systems 182 Long-Term Care in Argentina 188 Final Reflections 197 Annex 7A 198 Notes 200 References 200 Chapter 8 Funding Basic Education throughout the Demographic Transition in Argentina 203 Mariana Marchionni and Javier Alejo Introduction 203 Enrollment, Coverage, and Funding Trends for Basic Education in Argentina 204 Public Expenditure Effort to Fund Basic Education: Argentina in the International Context 209 Expenditure Effort in Basic Education throughout the Argentine Demographic Transformation 214 Final Reflections 227 Notes 230 References 233 Chapter 9 The Limits and Virtues of Reviewing Long-Term Fiscal Policy in Light of Demographic Change in Argentina 235 Oscar Cetrángolo Introduction 235 A Characterization of the Fiscal Situation at the Starting Point Chosen as the Base Year for the Estimates 236 Some Factors That Explain the Evolution of Public Expenditure 241 Persistent Tensions 245 Fiscal Projections and Challenges 250 As Time Goes By in Argentina • http://dx.doi.org/10.1596/978-1-4648-0530-1 viii Contents Final Reflections 255 Notes 256 References 256 Chapter 10 The Argentine Labor Market in a Context of Demographic Transition 259 Ignacio Apella and Sara Troiano Introduction 259 Demographic Transition, Dividends, and the Labor Market 260 Labor Market Entry and Exit Patterns 263 The Dependency Ratio and Economic Participation 265 Economic Participation among Young People in Argentina 272 The Active Elderly Population in Argentina 275 Final Reflections 281 Notes 283 References 283 Chapter 11 Argentine Labor Force Productivity in a Context of Demographic Aging 285 Ignacio Apella and Sara Troiano Introduction 285 Theoretical Framework 286 Methodologies Used to Estimate the Productivity-Age Profile 287 Salary as an Approximation of Productivity: How Plausible Is It? 289 Estimation of the Age Profile of Productivity 293 Policy Options: Taking Advantage of Heterogeneity in the EAP and Productivity 296 Final Reflections 300 Notes 301 References 301 Chapter 12 Demographics and Macroeconomics: Opportunities and Risks in Dividend-Era Argentina 305 José María Fanelli Introduction 305 Transition Demographics, Window of Opportunity, and Savings 307 The Life-Cycle Deficit and Sustaining Consumption 312 Dividends and the Life-Cycle Deficit 317 Financing the Life-Cycle Deficit, Accumulation, and Macroeconomic Imbalances 325 Final Reflections 334 As Time Goes By in Argentina • http://dx.doi.org/10.1596/978-1-4648-0530-1 Contents ix Notes 336 References 338 Chapter 13 As Time Goes By in Argentina: Economic Opportunities and Challenges of the Demographic Transition 341 Boxes 1.1 National Transfer Accounts 14 2.1 Methodological Summary of the Estimates Made and Comparison to United Nations 53 3.1 Estimating the Macrocontrols and Age Profiles 77 6.1 Catastrophic Health Care Expenses 164 8.1 Expenditure per Student and Education Quality 217 8.2 The Experiences of the Republic of Korea and Japan during the Demographic Dividend Period 218 8.3