Population Dynamics: Social Security, Markets, and Families

31 Pages Posted: 28 Sep 2010

See all articles by Andrew W. Mason

Andrew W. Mason

University of Hawaii at Manoa; East-West Center - Research Program

Ronald D. Lee

University of California, Berkeley - Department of Demography; National Bureau of Economic Research (NBER)

Sang-Hyop Lee

University of Hawaii - Department of Economics

Abstract

Upward intergenerational flows — from the working ages to old age — are increasing substantially in the advanced industrialized countries and are much larger than in developing countries. Population ageing is the most important factor leading to this change. Thus, in the absence of a major demographic shift (e.g. a return to high fertility), an increase in upward flows is inevitable. Even so, three other important factors will influence the magnitudes of upward flows. First, labour income varies at older ages due to differences in average age at retirement, productivity, unemployment, and hours worked. Second, the age patterns of consumption at older ages vary primarily due to differences in spending on health. Third, spending on human capital (i.e. spending on child health and education) varies. Human capital spending competes with spending on the elderly, but it also increases the productivity of subsequent generations of workers and the resources available to support consumption in old age. All contemporary societies rely on a variety of institutions and economic mechanisms to shift economic resources from the working ages to the dependent ages — the young and the old. Three institutions dominate intergenerational flows: governments which implement social security, education, and other public transfer programmes; markets which are key to the accumulation of assets (e.g. funded pensions and housing); and families which provide economic support to children in all societies and to the elderly in many. The objectives of this article are, first, to describe how population ageing and other changes influence the direction and magnitude of intergenerational flows; and, second, to contrast the institutional approaches to intergenerational flows as they are practiced around the world. The article relies extensively on National Transfer Accounts (NTA), a system for measuring economic flows across age in a manner consistent with the United Nations' System of National Accounts. These accounts are currently being constructed by research teams located in 33 countries on six continents representing wide variations in the level of development, demographics, and policies regarding intergenerational transfers.

Suggested Citation

Mason, Andrew W. and Lee, Ronald D. and Lee, Sang-Hyop, Population Dynamics: Social Security, Markets, and Families. International Social Security Review, Vol. 63, Nos. 3-4, pp. 145-175, July 2010, Available at SSRN: https://ssrn.com/abstract=1683690 or http://dx.doi.org/10.1111/j.1468-246X.2010.01373.x

Andrew W. Mason

University of Hawaii at Manoa ( email )

Honolulu, HI 96822
United States

East-West Center - Research Program ( email )

1601 East-West Road
Honolulu, HI 96848
United States

Ronald D. Lee

University of California, Berkeley - Department of Demography ( email )

2232 Piedmont Avenue
Berkeley, CA 94720-2120
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Sang-Hyop Lee

University of Hawaii - Department of Economics ( email )

2424 Maile Way, SSB 542
Honolulu, HI 96822
United States
808-956-8590 (Phone)

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