1. N ational T ransfer A ccounts Comments on Intergenerational Transfers, Age Structure, and Macroeconomics Sang-Hyop Lee University of Hawaii at Manoa WEAI 83 rd Annual Conference, Honolulu, USA July 2, 2008

2. N ational T ransfer A ccounts Do they look alike? Some age profiles show similar patternSome age profiles show similar pattern Economic lifecycle is influenced by biology. Individual choices and economics constraints are similar.Economic lifecycle is influenced by biology. Individual choices and economics constraints are similar. Some age profiles are quite different.Some age profiles are quite different. Source of supports are quite different (triangle graphs)Source of supports are quite different (triangle graphs) However, even for similar age profiles, there are IMPORTANT differences and similarities across countries and over time.However, even for similar age profiles, there are IMPORTANT differences and similarities across countries and over time.

3. N ational T ransfer A ccounts Important differences

4. N ational T ransfer A ccounts Source of differences Population structure mattersPopulation structure matters Level of development mattersLevel of development matters Consumption on elderly is high in rich countries, and is mostly due to medical expendituresConsumption on elderly is high in rich countries, and is mostly due to medical expenditures Richer countries have larger public consumption expenditures, on both health and education.Richer countries have larger public consumption expenditures, on both health and education. Consumption on children is low in low-income countries.Consumption on children is low in low-income countries. Richer countries have low LFPRs for children and elderlyRicher countries have low LFPRs for children and elderly Richer countries have low share of self-employment incomeRicher countries have low share of self-employment income

5. N ational T ransfer A ccounts Old-Age Reallocation Systems Source: Andrew Mason. Asset Public Transfers Familial Transfers Traditional society? Capital-based transformation Social welfare transformation

6. N ational T ransfer A ccounts Policy matters. Public Education Consumption of China China 1995 & 2002, per capita Age Ratio

7. N ational T ransfer A ccounts Policy may have other consequences. Private education consumption of China China 1995 & 2002, per capita Age Ratio

8. N ational T ransfer A ccounts Institution matters. Kenya and Nigeria Public consumption of Education

9. N ational T ransfer A ccounts Disaster/Crisis matters.

10. N ational T ransfer A ccounts Data matters. Constructing NTA requires lots of data sets.Constructing NTA requires lots of data sets. A good data set has the properties ofA good data set has the properties of Extent (richness): it has the variables of interest at a certain level of details.Extent (richness): it has the variables of interest at a certain level of details. Reliability: the variables are measured without error.Reliability: the variables are measured without error. Validity: the data set is representative.Validity: the data set is representative. E.g.) Asset based reallocationsE.g.) Asset based reallocations A lot of countries use information on inflow, but the profiles of outflow might be differentA lot of countries use information on inflow, but the profiles of outflow might be different Find a proxy (until you find a better proxy)Find a proxy (until you find a better proxy) One type of asset incomeOne type of asset income Use ratio of surveyUse ratio of survey Use other country data! (Kenya vs. Uganda)Use other country data! (Kenya vs. Uganda)

11. N ational T ransfer A ccounts In a comparative analysis, Computing confidence intervals helps.Computing confidence intervals helps. Comparing countries with similar culture, policy, economic development helps (regional analysis)Comparing countries with similar culture, policy, economic development helps (regional analysis) Each country has its own issues; how does it make the country different from others?Each country has its own issues; how does it make the country different from others? China: urban vs. rural issues, negative LCDChina: urban vs. rural issues, negative LCD India: public sector age reallocations.India: public sector age reallocations. Kenya & Nigeria: composition of consumption (education). Tax for education is earmarked.Kenya & Nigeria: composition of consumption (education). Tax for education is earmarked. Mexico: Revenue from oil, remittances.Mexico: Revenue from oil, remittances.

12. N ational T ransfer A ccounts Comparative Analysis (Cont’d) In particular, replication of some interesting results in another country setting greatly increases the confidence of the results. In particular, replication of some interesting results in another country setting greatly increases the confidence of the results. Comparing components is useful. (education/health/pension benefit/..) Comparing components is useful. (education/health/pension benefit/..) Comparing within a country across years has an advantage. Comparing within a country across years has an advantage. Do more analysis. Do more analysis.

13. N ational T ransfer A ccounts E.g. of “Do more analysis”. India and Mexico has different labor income profile

14. N ational T ransfer A ccounts Not mainly due to active population (L/N) by age,

15. N ational T ransfer A ccounts but due to different productivity per worker.

16. N ational T ransfer A ccounts Conclusion; Let me repeat “The goals of the NTA project” Develop a system of economic accounts that can be used to study the macroeconomic implications of aging.Develop a system of economic accounts that can be used to study the macroeconomic implications of aging. Estimate the accounts with historical depth for economies with different cultures, levels of development, economic systems and policies.Estimate the accounts with historical depth for economies with different cultures, levels of development, economic systems and policies. Analyze and explainAnalyze and explain variation in the economic lifecycle and the reallocation systems,variation in the economic lifecycle and the reallocation systems, macroeconomic effects of population aging, (simulation)macroeconomic effects of population aging, (simulation) economic implications of education, pension, health care, child subsidies, and other policy.economic implications of education, pension, health care, child subsidies, and other policy.

17. N ational T ransfer A ccounts Thank you.