1. April 1, 20061 Presentation in Honor of Richard Easterlin’s Continuing Contributions: A Macro- Perspective on Intergenerational Transfers Ronald Lee UC Berkeley Material from NTA project, funded by NIA grants to Andy Mason and Ron Lee

2. April 1, 20062 Comparative International Scope Main NIA funded project, Lee and Mason; teams for each country. –United States –Taiwan –Japan –Indonesia –Chile –Brazil –France Additional countries funded by UNFPA, Ogawa at Nihon Univ. –China –India –Philippines –Thailand –Uruguay (in-country UNFPA support) Individuals in additional countries may participate with own funding –Sweden –S. Korea –Austria –Slovenia

3. April 1, 20063 References – downloadable from http://www.schemearts.com/proj/nta/web /nta/show/Working%20Papers Ronald Lee and Andrew Mason, “A Research Plan for the Macroeconomic Demography of Intergenerational Transfers”, January 2004. Antoine Bommier, Ronald Lee, Timothy Miller, and Stephane Zuber, “Who wins and who loses? Public transfer accounts for US generations born 1850 to 2090”, December 2004. Andrew Mason, Ronald Lee, An-Chi Tung, Mun-Sim Lai, and Tim Miller, forthcoming. “Population Aging and Intergenerational Transfers: Introducing Age into National Accounts”, Economics of Aging Series, David Wise, ed. NBER and University of Chicago Press. Ronald Lee, Sang-Hyop Lee, and Andrew Mason. “Charting the Economic Life-Cycle”, November 2005 (under review)

4. April 1, 20064 1. Reallocation of income across age groups Flows of income from individuals of one age to those of another age are a pervasive part of our everyday life, but from the point of view of national accounts they are largely invisible. Some of these flows are attracting a lot of piecewise attention in terms of micro level motivations (investment in children, care for elderly parents, bequests, Social Security, Medicare) Big picture is largely ignored.

5. April 1, 20065 2. The economic life cycle: Labor earnings and consumption per capita Age Output per person per year Labor earnings, y l (x) Consumption, c(x) + + + -- - - -- - - - -- - -- - - -

6. April 1, 20066 3. Resource Reallocation Across Age and Time Form of Reallocation Family Institution Market Public Sector CapitalHouse Car Consumer Durables Inventories Education Factories Inventories Farms Social Infrastructure (Hospitals, Roads, Airports, Govt. Bldgs) TransfersChild Rearing College Costs Gifts Bequests Help to Elderly Government DebtPublic Education Medicaid, Medicare Social Security Food Stamps AFDC Borrowing/ Lending Familial Loans "Transfers" with a quid pro quo Credit Markets (mortgages, credit cards, bond issues) Government Loans

7. April 1, 20067 4. A Fundamental Change: The Historical Reversal of Direction of Flows Some production and consumption profiles have been estimated Direction of flows is indicated by the population weighted average ages of consumption and production See various articles for theory and mathematical framework Here go straight to results

8. April 1, 20068 United States [Lee & Miller] -2 +3 2050 Lee, 2000, 2003 (see cv)

9. April 1, 20069

10. 10 5. Estimated age profiles of production and consumption These come from NTA project Research by teams working on US and Taiwan Looks simple; actually a great deal of analysis lies behind them.

11. April 1, 200611

12. April 1, 200612

13. April 1, 200613 What institutions and mechanisms provide the flows that support these consumption patterns? Source by age –Inter vivos familial transfers –bequests –Public transfers –Through assets (credit and capital)

14. April 1, 200614 Source: See Lee, Lee and Mason (2005).

15. April 1, 200615 Source: See Lee, Lee and Mason (2005).

16. April 1, 200616 Mason, Lee, Tung, Mun-Sim Lai, and Miller (2005)

17. April 1, 200617 Mason, Lee, Tung, Mun-Sim Lai, and Miller (2005)

18. April 1, 200618 How the elderly fund consumption Mason, Lee, TungMun-Sim Lai, and Miller (2005)

19. April 1, 200619 Another illustration of what can be done with historical depth and projections

20. April 1, 200620 Net Present Values of Benefits minus Taxes for Generations Includes only Public Educ, Social Sec, and Medicare NPVs calculated based on –estimates and projections of age specific taxes paid and benefits received, 1850-2200 –Discounted at 3% real –actual or projected survival

21. April 1, 200621 Net Present Value at birth of expected life time benefits for Social Security, Medicare and Public Education as % of lifetime earnings, for generations born 1850 to 2090 Total See Bommier, Lee, Miller and Zuber

22. April 1, 200622 USA and France: A Comparison (see Stephane Zuber) NPVs for the US NPVs for France

23. April 1, 200623 USA and France: Accounting for the differences (1) see Stephane Zuber Spending as Percent of GDP: US Spending as Percent of GDP: France

24. April 1, 200624 The End