Aging in Asia Findings from New and Emerging Data Initiatives (2012) / Chapter Skim
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4 Population Aging, Intergenerational Transfers, and Economic Growth: Asia in a Global Context--Ronald Lee and Andrew Mason
4 Population Aging, Intergenerational Transfers, and Economic Growth: Asia in a Global Context--Ronald Lee and Andrew Mason
Pages 77-95
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From page 77... ...
In the end, the proportion 1 Research for this chapter was funded by parallel grants from the National Institutes of Health to Lee and Mason, NIA R37 AG025247 and R01 AG025488. We are grateful to Gretchen Donehower and Turro Wongkaren for their help and to all the country research teams in the National Transfer Account (NTA)
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From page 78... ...
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)
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From page 79... ...
, and unpaid family workers.3 It includes wages, salaries, and fringe benefits, as well as two-thirds of self-employment income, with the other one-third counted as asset income. Consumption consists of private consumption that is imputed to individuals within each household,4 as well as all public consumption including public education, publicly provided 2 These age profiles are cross-sectional and do not accurately represent longitudinal life cycle profiles.
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From page 80... ...
The age profiles of private flows such as consumption and transfers are estimated using nationally representative household surveys of income, consumption, and the labor force. The profiles for Japan, for example, are based on the 2004 National Survey of Family Income and Expenditure, for India on the 2004 India Human Development Survey (IHDS)
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From page 81... ...
Putting together the age patterns of consumption and labor income, we see that population aging in rich countries is more costly than in poor ones, because the elderly in rich countries consume more and produce less than in poor countries.
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From page 82... ...
China E Asia ex Japan (TW, KR, CN) FIGURE 4-1 Age profiles of consumption and labor income for countries and regions of the world, from National Transfer Accounts.
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From page 83... ...
As for labor income, the profile for South and Southeast Asia looks much like that for the other poor countries. However, the age profile for East Asia starts at older ages, reflecting the greater human capital investment, and then rises more rapidly, crossing the other profiles at around age 20.
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From page 84... ...
Changes depend entirely on chang ing population age distributions as these interact with a country's age profiles. For easier comparison of proportional changes across countries, we set average consumption at ages 30–49 equal to 60% of average labor income at these ages in the base year.
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From page 85... ...
We see that the majority (five out of eight) of the Asian NTA economies have declining support ratios over this period, indicating that population aging will reduce the rate of consumption growth, other things being equal.
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From page 86... ...
If these assets are invested in domestic capital, then capital per worker will rise, raising the productivity of labor and offsetting to a greater or lesser degree the drop in support ratios (Lee, Mason, and Miller, 2003; Mason and Lee, 2007)
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From page 87... ...
The Asian countries fall close to the line, with China, Japan, South Korea, and Taiwan closer to the transfers vertex and India, Indonesia, and the Philippines at the other end of the line. These are also the poorest NTA countries in the region, and poor countries generally have higher labor income in old age.
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From page 88... ...
China, South Korea, and Taiwan are well inside the triangle, indicating that old age support is IN Assets PH MX Europe and United States Latin America 1/3 Asia TH US 2/3 UY KR ES JP 2/3 DE BR 1/3 CR CL TW CN AT SI SE Family HU Public transfers transfers 2/3 1/3 FIGURE 4-4 How is elder consumption net of labor income funded? Shares of public transfers, family transfers, and asset-based reallocations for seventeen NTA countries.
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From page 89... ...
It does mean, however, that in these countries, population aging is less likely to produce a second demographic dividend by raising asset accumulation and making the economy more capital intensive and the labor more productive. POPULATION AGING AND HUMAN CAPITAL ACCUMULATION The main cause of population aging is low fertility, not longer life.
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From page 90... ...
Figure 4-5 shows the result for the eight Asian countries, for both total and private human capital expenditures. For total human capital expenditures, there is a strong negative relationship, with an elasticity of –.91, quite close to the expository model prediction of –1.0.
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From page 91... ...
. Figure 4-5 The East Asian countries have far lower fertility than those in South east Asia or India, and they have correspondingly higher human capital investment per child.
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From page 92... ...
The difficulties with measures of asset holdings are particularly severe in East Asia, where many elderly transfer ownership of their assets to their co-residing adult son well before the time of death. This practice makes it very difficult to trace the accumulation of assets over the life course, which is necessary for understanding how population aging affects asset accumulation.
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From page 93... ...
In India and Southeast Asia, however, neither public transfers nor net familial transfers go to the elderly. The elderly, who continue to earn labor income, also receive substantial asset income and use it not only for their own consumption, but also to make net transfers to their children.
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From page 94... ...
In countries where the elderly hold substantial assets that they accumulated through their sav ings out of their lifetime earnings rather than through inheritance, population aging will tend to raise asset holdings per capita, and if these are invested in the domestic economy, then the rising capital labor ratio will boost productivity and wages. In addition, the low and declining fertility that is the main cause of population aging is associated with increased investments in human capital per child, raising future productivity and earnings.
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From page 95... ...
Pp. 209-236 in Population Aging and the Generational Economy: A Global Perspective, R
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