Population Aging and the Generational Economy This page intentionally left blank Population Aging and the Generational Economy A Global Perspective Ronald Lee Professor of Demography and Jordan Family Professor of Economics, and Director, Center for the Economics and Demography of Aging, University of California, Berkeley, USA Andrew Mason Professor of Economics, University of Hawaii at Manoa, and Senior Fellow, Population and Health Studies, East-West Center, Hawaii, USA Edward Elgar Cheltenham, UK • Northampton, MA, USA International Development Research Centre Ottawa • Cairo • Dakar • Montevideo • Nairobi • New Delhi • Singapore © Ronald Lee and Andrew Mason 2011 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical or photocopying, recording, or otherwise without the prior permission of the publisher. Published by Edward Elgar Publishing Limited The Lypiatts 15 Lansdown Road Cheltenham Glos GL50 2JA UK Edward Elgar Publishing, Inc. William Pratt House 9 Dewey Court Northampton Massachusetts 01060 USA International Development Research Centre PO Box 8500 Ottawa, ON K1G 3H9 Canada www.idrc.ca/[email protected] ISBN 978 1 55250 514 4 (IDRC e-book) A catalogue record for this book is available from the British Library Library of Congress Control Number: 2011925743 ISBN 978 1 84844 898 8 (cased) Typeset by Servis Filmsetting Ltd, Stockport, Cheshire Printed and bound by MPG Books Group, UK Contents List of contributors ix Preface xiv PART I FUNDAMENTAL PRINCIPLES AND CONCEPTS 1 1 Population aging and the generational economy: key fi ndings 3 Andrew Mason and Ronald Lee 2 Theoretical aspects of National Transfer Accounts 32 Ronald Lee and Andrew Mason 3 Introducing age into national accounts 55 Andrew Mason and Ronald Lee 4 Lifecycles, support systems, and generational fl ows: patterns and change 79 Ronald Lee and Andrew Mason PART II COMPARATIVE ANALYSES OF AGE AND THE MACROECONOMY 107 5 Labor income over the lifecycle 109 Sang- Hyop Lee and Naohiro Ogawa 6 Consumption over the lifecycle: an international comparison 136 An- Chi Tung 7 The rise of the intergenerational state: aging and development 161 Tim Miller 8 Private transfers in comparative perspective 185 Ronald Lee and Gretchen Donehower 9 Asset- based fl ows from a generational perspective 209 Andrew Mason, Naohiro Ogawa, Amonthep Chawla, and Rikiya Matsukura v vi Population aging and the generational economy PART III COUNTRY STUDIES OF AGE AND THE MACROECONOMY 237 A Overviews of the generational economy 10 How intergenerational transfers fi nance the lifecycle defi cit in Spain 241 Concepció Patxot, Elisenda Rentería, Miguel Sánchez- Romero, and Guadalupe Souto 11 National Transfer Accounts for Austria: low levels of education and the generosity of the social security system 256 Jože Sambt and Alexia Prskawetz 12 The signifi cance of inter- age economic transfers in Chile 269 Jorge Bravo and Mauricio Holz 13 The economic lifecycle and intergenerational redistribution in Mexico 283 Iván Mejía- Guevara 14 National Transfer Accounts for Finland 297 Risto Vaittinen and Reijo Vanne B The economic lifecycle 15 The changing shape of the economic lifecycle in the United States, 1960 to 2003 313 Ronald Lee, Gretchen Donehower, and Tim Miller 16 Labor income and consumption profi les: the case of Germany 327 Fanny A. Kluge 17 Slovenia: independence and the return to the family of European market economies 340 Jože Sambt and Janez Malačič 18 Changes in patterns of Philippine lifecycle consumption and labor income between 1994 and 2002 354 Rachel H. Racelis and J.M. Ian Salas 19 National Transfe r Accounts for Kenya: the economic lifecycle in 1994 367 Germano Mwabu, Moses K. Muriithi, and Reuben G. Mutegi Contents vii C Systems of intergenerational fl ows 20 Intergenerational resource allocation in the Republic of Korea 381 Chong- Bum An, Young- Jun Chun, Eul- Sik Gim, Namhui Hwang, and Sang- Hyop Lee 21 Idiosyncrasies of intergenerational transfers in Brazil 394 Cassio M. Turra, Bernardo L. Queiroz, and Eduardo L.G. Rios- Neto 22 The changing patterns of China’s public services 408 Ling Li, Qiulin Chen, and Yu Jiang 23 Intergenerational redistribution in Sweden’s public and private sectors 421 Daniel Hallberg, Thomas Lindh, Gustav Öberg, and Charlotte Thulstrup 24 Public transfer fl ows between generations in Uruguay 434 Marisa Bucheli and Cecilia González 25 The structure of generational public transfer fl ows in Nigeria 446 Adedoyin Soyibo, Olanrewaju Olaniyan, and Akanni O. Lawanson 26 The role of familial transfers in supporting the lifecycle defi cit in India 459 Laishram Ladusingh and M.R. Narayana D Issues related to the generational economy 27 The elderly as latent assets in aging Japan 475 Naohiro Ogawa, Rikiya Matsukura, and Amonthep Chawla 28 Living arrangements and support for the elderly in Taiwan 488 An- Chi Tung and Nicole Mun Sim Lai 29 Transfer accounts in Costa Rica’s mixed economy under rapidly changing demographic conditions 500 Luis Rosero- Bixby, Paola Zúñiga- Brenes, and Andrea Collado 30 The support system for Indonesian elders: moving toward a sustainable national pension system 513 Maliki 31 Incorporating time into the National Transfer Accounts: the case of Thailand 528 Mathana Phananiramai 32 National Transfer Accounts in Hungary: contribution asset and returns in a pay- as- you- go pension scheme 542 Róbert I. Gál, Vera Gergely, and Márton Medgyesi viii Population aging and the generational economy PART IV APPENDIX TABLES 555 Glossary 567 Index 573 Contributors Chong- Bum An is Professor, Department of Economics, Sungkyunkwan University, Seoul, Republic of Korea. Jorge Bravo is Chief, Population and Development Section, Department of Economic and Social Aff airs, Population Division, United Nations, New York, USA. Marisa Bucheli is Associate Professor, Department of Economics, Faculty of Social Sciences, Universidad de la República, Montevideo, Uruguay. Amonthep Chawla is Research Specialist, Thailand Development Research Institute, Bangkok, Thailand. Qiulin Chen is Postdoctoral Fellow, China Center for Economic Research, Peking University, Beijing, People’s Republic of China and Postdoctoral Scholar, Walter H. Shorenstein Asia- Pacifi c Research Center, Stanford University, USA. Young- Jun Chun is Professor, Division of Economics and Finance, Hanyang University, Seoul, Republic of Korea. Andrea Collado was Research Associate, Centro Centroamericano de Población, Universidad de Costa Rica, San José, Costa Rica, when co- authoring Chapter 29. Gretchen Donehower is Researcher, Center for the Economics and Demography of Aging, University of California, Berkeley, USA. Róbert I. Gál is Senior Researcher, TARKI Social Research Institute, Budapest, Hungary. Vera Gergely is IT Quality Assurance Specialist, Allianz Hungaria Insurance, Budapest, Hungary. Eul- Sik Gim is Fellow, Gyeonggi Research Institute, Suwon, Republic of Korea. Cecilia González is Assistant Professor, Department of Economics, Faculty of Social Sciences, Universidad de la República, Montevideo, Uruguay. ix x Population aging and the generational economy Daniel Hallberg is Assistant Professor, Swedish Social Insurance Inspectorate, Stockholm, Sweden, and was Assistant Professor, Institute for Future Studies, Stockholm, Sweden, when co- authoring Chapter 23. Mauricio Holz is Research Assistant, CELADE – Population Division, Economic Commission for Latin American Countries and the Caribbean, United Nations, Santiago, Chile. Namhui Hwang is a doctoral student, Department of Economics, Sungkyunkwan University, Seoul, Republic of Korea. Yu Jiang is a PhD candidate in the National School of Development, Peking University, Beijing, People’s Republic of China. Fanny A. Kluge is a doctoral candidate in Economics, Max Planck Institute for Demographic Research, Rostock, Germany. Laishram Ladusingh is Professor, International Institute for Population Sciences, Deonar, Mumbai, India. Nicole Mun Sim Lai is Senior Lecturer, Accounting and Finance, School of Business, Monash University Sunway Campus, Malaysia. Akanni O. Lawanson is Lecturer, Department of Economics, University of Ibadan, Ibadan, Nigeria. Ronald Lee is Professor of Demography and Jordan Family Professor of Economics, and Director of the Center for the Economics and Demography of Aging (CEDA), University of California, Berkeley, USA. Sang- Hyop Lee is Associate Professor, Department of Economics, University of Hawaii at Manoa, Honolulu, Hawaii, USA. Ling Li is Professor of Economics, China Center for Economic Research, Peking University, Beijing, People’s Republic of China. Thomas Lindh is Professor of Economics, Linnaeus University, Växjö, Sweden, and Researcher, Institute for Futures Studies, Stockholm. Janez Malačič is Professor of Demography and Labor Economics, Faculty of Economics, University of Ljubljana, Slovenia. Maliki is Deputy Director of Strategic Planning for Funding Development, National Development and Planning Agency, Bappenas, Indonesia. Contributors xi Andrew Mason is Professor, Department of Economics, University of Hawaii at Manoa, and Senior Fellow, East- West Center, Honolulu, Hawaii, USA. Rikiya Matsukura is Staff Researcher, Population Research Institute, Nihon University, Tokyo, Japan. Márton Medgyesi is Senior Researcher, TARKI Social Research Institute, Budapest, Hungary. Iván Mejía- Guevara is Researcher, Center on the Economics and Demography of Aging, University of California, Berkeley, USA. Tim Miller