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of the population in the working ages may be close to its level before the transition began—but with the elderly traded for dependent children.

Children and the elderly are similar from an economic perspective, because both groups have labor income that is small relative to their consumption. They must rely on sources other than their labor to provide for their material needs. However, children rely almost exclusively on public and private transfers to provide for their net consumption needs, while the elderly, in addition to these sources, may also rely on accumulated assets to fund their consumption. These assets have an important bearing on economic performance because they are a source of non-labor income and, in addition, if invested in the domestic economy, they raise its labor productivity. To the extent that the elderly rely on assets to fund their old age consumption, the burden on workers (and taxpayers) is reduced, and actual and anticipated population aging and longer life can accelerate the accumulation of capital and boost economic growth. To summarize, population aging has a negative effect on per capita consumption through increased dependency and may also have a positive effect through increased capital accumulation.

We will also suggest that lower fertility, the most important source of population aging, is associated with higher human capital investments per child. Thus, over the demographic transition, the quality and productivity of workers rise at the same time that their numbers fall. This change and the effects of population aging on physical capital provide two powerful mechanisms for maintaining or increasing standards of living despite the deterioration in the support ratio.

Estimates in this chapter are based on National Transfer Accounts (NTAs), an international project that draws on the work of research teams in 36 countries on six continents to estimate age profiles of key economic flows across age (see Table 4-1, along with the dates to which the NTA estimates refer.

NATIONAL TRANSFER ACCOUNTS: DATA AND METHODS

NTAs are composed of four broad economic flows: labor income, consumption, transfers, and asset-based flows. Where appropriate, flows are distinguished by whether they are public or private and by their purpose (education, health, and other). The relationship among the flows is captured by the flow constraint: The gap between consumption and labor income must equal net transfers plus asset-based flows. Only a brief overview of methods can be provided here. They are documented fully in Lee and Mason et al. (2011) and Mason et al. (2009).

The age profiles of labor income and consumption provide a cross-



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