1. Opening Remarks 2 nd Workshop on National Transfer Accounts Ronald Lee

2. Outline Introduction Uses of the NTA Progress to date Interaction of the country projects Goals of the meeting

3. “An idea whose time has come” (quote from a reviewer of the proposal)

4. A large share of income is reallocated to others through familial transfers, public sector programs, or the market. –In Taiwan in 1979, 66% of family consumption was arranged through transfers (Maliki)

5. “An idea whose time has come” (quote from a reviewer of the proposal) A large share of income is reallocated to others through familial transfers, public sector programs, or the market. –In Taiwan in 1979, 66% of family consumption was arranged through transfers (Maliki) Patterns of transfers are often studied piecemeal, but not comprehensively and coherently

6. “An idea whose time has come” (quote from a reviewer of the proposal) A large share of income is reallocated to others through familial transfers, public sector programs, or the market. –In Taiwan in 1979, 66% of family consumption was arranged through transfers (Maliki) Patterns of transfers are often studied piecemeal, but not comprehensively and coherently Our project will develop new measures of age-specific resource flows –Public and familial –Historical, current, and future projected –Comparative international context with different Values Institutions Demography policies

7. “An idea whose time has come” (quote from a reviewer of the proposal) A large share of income is reallocated to others through familial transfers, public sector programs, or the market. –In Taiwan in 1979, 66% of family consumption was arranged through transfers (Maliki) Patterns of transfers are often studied piecemeal, but not comprehensively and coherently Our project will develop new measures of age-specific resource flows –Public and familial –Historical, current, and future projected –Comparative international context with different Values Institutions Demography policies Adding behavioral content, consider the interactions of public and private transfer systems with each other and with changing demography

8. International Scope of this project Seven countries in NIA-funded project –US, Taiwan, France, Brazil, Chile, Japan, Indonesia Others may participate to varying degrees with other funding—still hypothetical –China, India, Thailand, Philippines –Norway, Australia

9. Transfer experience of team Auerbach, generational accounts Mason, familial transfers, demography of saving Bommier, Lee formal accounting systems Wolff, familial transfers Bravo, privatization of public pensions Turra, transfer accounts for Brazil Miller, transfer accounts for US

10. Basic descriptive NTA data Age-time matrices of flows to and from individuals –Public sector taxes and transfers by program –Intra-household private consumption, saving, transfers –Inter-household private transfers What are these good for?

11. Descriptive uses of public sector matrix (all have been done for U.S.)

12. Fiscal projections –Consequences of population aging –Different demographic scenarios

13. Descriptive uses of public sector matrix (all have been done for U.S.) Fiscal projections –Consequences of population aging –Different demographic scenarios Stochastic fiscal projections –Public pension finances –Health care

14. Descriptive uses of public sector matrix (all have been done for U.S.) Fiscal projections –Consequences of population aging –Different demographic scenarios Stochastic fiscal projections –Public pension finances –Health care Fiscal impact of demographic events (fiscal externalities) –Births –deaths by age –immigrants

15. Descriptive uses of public sector matrix (all have been done for U.S.) Fiscal projections –Consequences of population aging –Different demographic scenarios Stochastic fiscal projections –Public pension finances –Health care Fiscal impact of demographic events (fiscal externalities) –Births –deaths by age –immigrants Accounts for various programs –Implicit debt and explicit debt –Sustainability (infinite horizon) measures

16. Descriptive uses of public sector matrix (all have been done for U.S.) Fiscal projections –Consequences of population aging –Different demographic scenarios Stochastic fiscal projections –Public pension finances –Health care Fiscal impact of demographic events (fiscal externalities) –Births –deaths by age –immigrants Accounts for various programs –Implicit debt and explicit debt –Sustainability (infinite horizon) measures Generational accounting for current programs and proposed policies –Intergenerational redistribution, equity –Historical accounts

17. Descriptive uses of public sector matrix (all have been done for U.S.) Fiscal projections –Consequences of population aging –Different demographic scenarios Stochastic fiscal projections –Public pension finances –Health care Fiscal impact of demographic events (fiscal externalities) –Births –deaths by age –immigrants Accounts for various programs –Implicit debt and explicit debt –Sustainability (infinite horizon) measures Generational accounting for current programs and proposed policies –Intergenerational redistribution, equity –Historical accounts Policy simulations –Privatization of pension programs –Introduction of public sector pensions

18. Descriptive uses of public sector matrix (all have been done for U.S.) Fiscal projections –Consequences of population aging –Different demographic scenarios Stochastic fiscal projections –Public pension finances –Health care Fiscal impact of demographic events (fiscal externalities) –Births –deaths by age –immigrants Accounts for various programs –Implicit debt and explicit debt –Sustainability (infinite horizon) measures Generational accounting for current programs and proposed policies –Intergenerational redistribution, equity –Historical accounts Policy simulations –Privatization of pension programs –Introduction of public sector pensions Changing direction of public sector transfers—upward or downward (see next slide)

20. Descriptive uses of private transfer accounts Caveat: Intrahousehold transfers are mostly not observed directly. They are estimated based strongly on rules for allocating household consumption. Not clear how robust.

21. Descriptive uses of private transfer accounts Caveat: Intrahousehold transfers are mostly not observed directly. They are estimated based strongly on rules for allocating household consumption. Not clear how robust. Cross-sectional age-consumption profiles describe the relative consumption levels of children, prime age adults, and the elderly. –Who consumes more? –How has this distribution changed historically? Any insights about why? –Issues raised by Sam Preston in his well-known paper.

22. Descriptive uses of private transfer accounts Caveat: Intrahousehold transfers are mostly not observed directly. They are estimated based strongly on rules for allocating household consumption. Not clear how robust. Cross-sectional age-consumption profiles describe the relative consumption levels of children, prime age adults, and the elderly. –Who consumes more? –How has this distribution changed historically? Any insights about why? –Issues raised by Sam Preston in his well-known paper. What share of national income is transferred from the recipient to others? –Is this share greater in less developed nations? –How has the share changed historically? –How is the share projected to change in the future?

23. Descriptive uses of private transfer accounts Caveat: Intrahousehold transfers are mostly not observed directly. They are estimated based strongly on rules for allocating household consumption. Not clear how robust. Cross-sectional age-consumption profiles describe the relative consumption levels of children, prime age adults, and the elderly. –Who consumes more? –How has this distribution changed historically? Any insights about why? –Issues raised by Sam Preston in his well-known paper. What share of national income is transferred from the recipient to others? –Is this share greater in less developed nations? –How has the share changed historically? –How is the share projected to change in the future? What is the net direction of inter-age transfer flows, upward or downward? –How has the direction of flows changed historically?

24. Descriptive uses of private transfer accounts Caveat: Intrahousehold transfers are mostly not observed directly. They are estimated based strongly on rules for allocating household consumption. Not clear how robust. Cross-sectional age-consumption profiles describe the relative consumption levels of children, prime age adults, and the elderly. –Who consumes more? –How has this distribution changed historically? Any insights about why? –Issues raised by Sam Preston in his well-known paper. What share of national income is transferred from the recipient to others? –Is this share greater in less developed nations? –How has the share changed historically? –How is the share projected to change in the future? What is the net direction of inter-age transfer flows, upward or downward? –How has the direction of flows changed historically? The stocks of transfer wealth are also important –How much transfer wealth or debt is created by these transfer flows? –What portion of life cycle wealth is held in form of transfer wealth versus capital?

25. Descriptive uses of private transfer accounts Caveat: Intrahousehold transfers are mostly not observed directly. They are estimated based strongly on rules for allocating household consumption. Not clear how robust. Cross-sectional age-consumption profiles describe the relative consumption levels of children, prime age adults, and the elderly. –Who consumes more? –How has this distribution changed historically? Any insights about why? –Issues raised by Sam Preston in his well-known paper. What share of national income is transferred from the recipient to others? –Is this share greater in less developed nations? –How has the share changed historically? –How is the share projected to change in the future? What is the net direction of inter-age transfer flows, upward or downward? –How has the direction of flows changed historically? The stocks of transfer wealth are also important –How much transfer wealth or debt is created by these transfer flows? –What portion of life cycle wealth is held in form of transfer wealth versus capital? Implicit familial transfer debt for familial old age support (analogous to implicit debt in public pension programs) –How has it changed historically, and how differ between countries?

26. Descriptive uses of private transfer accounts (continued) Kotlikoff-Summers vs Modigliani type longitudinal accounting for life cycle saving versus bequest motive as explanation for national capital stock. How does population aging affect familial transfer systems? –Fewer adult children supporting more surviving parents –Fewer children to support, but more spent on each –Are systems sustainable What shares of total household consumption go to children, prime age, and elderly; changes over demog. transition

27. Interaction of transfers and other behavior-- beyond description Individual behavior changes in response to transfers. Do public sector pensions crowd out familial old age support? Does public education crowd out familial expenditure on education? Private savings behavior should be analyzed in context of familial and public transfers. Presumably these are all substitutes. Does national transfer wealth (e.g. implicit public pension debt plus familial transfer debt) displace capital?

28. Progress to date varies by country Valuable progress on wiki web site Valuable progress on templates for uploading data, defining data needs Moderately complete public and private accounts for US and Brazil around 1995, cross- section. Public accounts for US and France, 1850 to 2000, projected to 2200. US incomplete. Progress on Taiwan. Not sure about other countries – will hear later.

29. Goals of this meeting: methods for construction of descriptive accounts. Establish baseline methods, e.g. for –Allocating consumption within the household. –Constructing familial accounts –Constructing public sector accounts coordinate schedule for work Issues of behavioral responses to public transfers, interactions, etc. will be addressed next year.

30. Coordination of efforts Will discuss this tomorrow But idea is to agree on minimal specific goals for first year –Provide some intermediate comparative output –Basis for possible papers We suggest minimally complete accounts for single recent year Fiscal can be platform for many projections, simulations, assessments, as reviewed earlier.