PRESENTATION ON NTA FOR INDIA: 2 PM TO 4 PM Chairperson: Professor - - PDF document

INSTITUTE FOR SOCIAL AND ECONOMIC CHANGE, BANGALORE NATIONAL SEMINAR ON CONSTRUCTION OF NATIONAL TRANSFER ACCOUNTS (NTA) FOR INDIA 10 AUGUST 2007 Venue of the Seminar (www.thecapitolhotel.com) “THE WHITE HOUSE”, THE CAPITOL, NO.3, RAJBHAVAN ROAD, BANGALORE Programme REGISTRATION: 9 AM to 10 AM OPENING CEREMONY: 10 AM to 10.30 AM

• Welcome: Professor N. Jayaram, Director, ISEC
• Opening remarks:

♦ Dr Naohiro Ogawa, Director, Nihon University Population Research Institute, Tokyo, Japan.

• Chairperson’s Remarks: Professor TCA Anant, Member-Secretary, ICSSR

Coffee/Tea: 10.30 AM to 11 AM INTERNATIONAL PRESENTATIONS: 11 AM to 1 PM

• Chairman: Professor S. Parasuraman, Director, Tata Institute of Social Science,

Mumbai ♦ Presentation by Professor Andrew Mason [Senior Fellow, East-West Center, & Professor, Department of Economics, University of Hawaii at Manoa, Honolulu, USA]: Demographic Dividends and National Transfer Accounts ♦ Professor Naohiro Ogawa: Population Aging and Changing Intergenerational Transfers: Lessons from the Japanese Experience

• Discussion
• Chairperson’s remarks

Lunch: 1 PM to 2 PM

PRESENTATION ON NTA FOR INDIA: 2 PM TO 4 PM

• Chairperson: Professor Andrew Mason
• Presentation by Professor M.R. Narayana, ISEC, and Professor L. Ladusingh, IIPS
• Discussion
• Chairperson’s remarks
• Vote of thanks: Professor M.R. Narayana
• Coffee/Tea: 4 PM to 4.30 PM

1

N National

ational T

Transfer

ransfer A

Accounts

ccounts

Demographic Dividends Demographic Dividends and and National Transfer Accounts National Transfer Accounts

Andrew Mason Andrew Mason University of Hawaii at University of Hawaii at Manoa Manoa East East-

• West Center

West Center

National Transfer Accounts

Demographic transition leads to two Demographic transition leads to two important changes in age structure important changes in age structure

► ►

Working age population Working age population

• In recent decades, the share of the working age

In recent decades, the share of the working age population has been increasing. population has been increasing.

• Transitory phenomenon: In the future, the share of

Transitory phenomenon: In the future, the share of the working age population will decline. the working age population will decline.

► ►

Dependent populations Dependent populations

• Share of children is declining;

Share of children is declining;

• Share of elderly is increasing.

Share of elderly is increasing.

2

National Transfer Accounts

Population Age Structure Population Age Structure Taiwan, 1950 Taiwan, 1950-

• 2050

2050

10 20 30 40 50 60 70 80 90 100

1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

Percentage Working age (20-64) Children (0-19) Elderly (65+)

National Transfer Accounts

Two Demographic Dividends Two Demographic Dividends

► ►First Dividend

First Dividend

• Per capita income rises (and falls) with the

Per capita income rises (and falls) with the share of the population in working ages. share of the population in working ages.

• Favorable effects on economic growth in many

Favorable effects on economic growth in many countries in Asia and elsewhere. countries in Asia and elsewhere.

• However, first dividend will soon turn negative.

However, first dividend will soon turn negative.

3

National Transfer Accounts

Two Demographic Dividends Two Demographic Dividends

► ►Second Dividend

Second Dividend

• Increase in the population at old ages will lead

Increase in the population at old ages will lead to greater wealth. to greater wealth.

• Two possible outcomes:

Two possible outcomes:

► ►More capital and higher wages

More capital and higher wages

► ►Foreign investment

Foreign investment

• Higher standards of living in the domestic and

Higher standards of living in the domestic and the foreign economy. the foreign economy.

National Transfer Accounts

Illustrative Simulations Illustrative Simulations

► ►ASEAN age structure, 1950

ASEAN age structure, 1950-

• 2050. Source:
• 2050. Source:

UN Population Prospects 2006. UN Population Prospects 2006.

► ►Economic assumptions based on estimates

Economic assumptions based on estimates from the National Transfer Account project. from the National Transfer Account project.

► ►Details of simulation model available on the

Details of simulation model available on the NTA website. NTA website.

4

National Transfer Accounts

0.05 0.1 0.15 0.2 0.25 1940 1960 1980 2000 2020 2040 2060

Net Saving Rate High IG Transfers Low IG Transfers

Net Saving Rate, ASEAN Net Saving Rate, ASEAN

Source: Mason, Lee, and Lee 2007.

National Transfer Accounts

ASEAN, Assets/Labor Income ASEAN, Assets/Labor Income

2 4 6 8 1940 1960 1980 2000 2020 2040 2060 Assets/Labor Income Low IG Transfers High IG Transfers

Source: Mason, Lee, and Lee 2007.

5

National Transfer Accounts

ASEAN, Effect of Age Structure on ASEAN, Effect of Age Structure on Consumption Consumption

80 100 120 140 160 1940 1960 1980 2000 2020 2040 2060 Consumption Index (1950=100)

Low IG Transfers High IG Transfers Source: Mason, Lee, and Lee 2007.

National Transfer Accounts

Effect of age structure depends on . . . Effect of age structure depends on . . .

► ►Economic lifecycle

Economic lifecycle

• Age profile of labor productivity

Age profile of labor productivity

• Age profile of consumption

Age profile of consumption

► ►Economic support system

Economic support system

• Public transfers

Public transfers

• Familial transfers

Familial transfers

• Assets

Assets

6

National Transfer Accounts

Objective of the National Transfer Objective of the National Transfer Account (NTA) Project Account (NTA) Project

► ► Develop and apply a comprehensive system for measuring

Develop and apply a comprehensive system for measuring economic flows across age groups in a manner consistent economic flows across age groups in a manner consistent with the System of National Accounts with the System of National Accounts

► ► Analyze the interplay between age, policy, and

Analyze the interplay between age, policy, and macroeconomic performance macroeconomic performance

• How do economic flows vary with age and why?

How do economic flows vary with age and why?

• How will changes in age structure affect our economies?

How will changes in age structure affect our economies?

• What policies should be pursued in light of these findings?

What policies should be pursued in light of these findings?

► ► Economic lifecycle

Economic lifecycle

► ► Transfers, saving, and investment

Transfers, saving, and investment

► ► Age structure: fertility and immigration.

Age structure: fertility and immigration.

National Transfer Accounts

Organization of the project Organization of the project

► ► East

East-

• West Center and CEDA, UC

West Center and CEDA, UC-

• Berkeley

Berkeley

► ► Nihon University Population Research Institute,

Nihon University Population Research Institute, Asia Regional Office Asia Regional Office

► ► Funding

Funding

• NIA

NIA

• UNFPA

UNFPA

• IDRC

IDRC

• MacArthur Foundation

MacArthur Foundation

• Others

Others

► ► www.ntaccounts.org

www.ntaccounts.org

7

National Transfer Accounts

Research Teams in 23 Countries Research Teams in 23 Countries

National Transfer Accounts

Per Capita Economic Lifecycle Per Capita Economic Lifecycle Taiwan, 2003 Taiwan, 2003

0.2 0.4 0.6 0.8 1 1.2 10 20 30 40 50 60 70 80 90+ Relative to Yl(30-49 Consumption Labor Income

8

National Transfer Accounts

Per Capita Lifecycle Deficit (C Per Capita Lifecycle Deficit (C-

• Yl

Yl) ) Taiwan, 2003 Taiwan, 2003

• 0.6
• 0.4
• 0.2

0.2 0.4 0.6 0.8 10 20 30 40 50 60 70 80 90+ Relative to Yl(30-49 Total cost (LCD) of raising child from birth to age 25 is 14.0 years of labor by a prime-age adult. Total cost (LCD) of supporting elderly surviving to age 90 is 15.9 years of prime-age adult labor.

National Transfer Accounts

Issue 1. How does the economic Issue 1. How does the economic lifecycle vary and why? lifecycle vary and why?

► ► Economic factors, e.g., income, economic

Economic factors, e.g., income, economic structure, and technology. structure, and technology.

► ► Cultural and institutional factors

Cultural and institutional factors

► ► Demographic factors

Demographic factors

• Quantity

Quantity-

• quality tradeoff

quality tradeoff

• Age structure and political power

Age structure and political power

► ► Policy

Policy

• Education

Education

• Retirement

Retirement

• Pensions

Pensions

• Health care

Health care

9

National Transfer Accounts

Age Profile of Labor Income, Taiwan

0.2 0.4 0.6 0.8 1 1.2 12 22 32 42 52 62 72 Yl(x)/Yl(30-49)

► ► In Taiwan, earning span

In Taiwan, earning span is being is being “ “squeezed squeezed” ”. .

► ► Between 1978 and 2001

Between 1978 and 2001 labor income at age 21 labor income at age 21 declined from 45% to declined from 45% to 24% of an adult 30 24% of an adult 30-

• 49.

49.

► ► Labor income at age 60

Labor income at age 60 declined from 63% to declined from 63% to 35% of an adult 30 35% of an adult 30-

• 49.

49.

1978 2001

National Transfer Accounts

Age Age-

• profile of Consumption, Taiwan

profile of Consumption, Taiwan

► ► Consumption increased

Consumption increased relative to labor relative to labor income by about 1% income by about 1% per year at most ages. per year at most ages.

► ► Much more rapid

Much more rapid increase in increase in consumption by consumption by children. children.

► ► Cause is growth in

Cause is growth in spending on education. spending on education.

0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 2 3 4 5 6 7 8 9 C/Yl(30-49) 1978 2001

10

National Transfer Accounts

Tradeoff: Spending per Child and Tradeoff: Spending per Child and Number of Children, 13 Countries Number of Children, 13 Countries

y = -7.7914x + 15.473 R2 = 0.6125 6 7 8 9 10 11 12 13 14 15 16 0.2 0.4 0.6 0.8 1 1.2 Child Dependency Ratio: N(0-19)/N(20-59) LCD Children/Yl(30-49

National Transfer Accounts

Tradeoff: Spending per Child and Tradeoff: Spending per Child and Number of Children, 13 Countries Number of Children, 13 Countries

6 7 8 9 10 11 12 13 14 15 16 0.2 0.4 0.6 0.8 1 1.2 Child Dependency Ratio: N(0-19)/N(20-59) LCD Children/Yl(30-49 Jp US Ch Tw SK Th Sw Fr Indo Ur CR In Ph

11

National Transfer Accounts

Tradeoff: Spending per Elderly and Tradeoff: Spending per Elderly and Number of Elderly, 13 Countries Number of Elderly, 13 Countries

y = 11.993x + 4.5285 R2 = 0.4266 2 3 4 5 6 7 8 9 10 11 12 0.1 0.15 0.2 0.25 0.3 0.35 0.4 0.45 0.5 Old-age Dependency Ratio: N(60+)/N(20-59) LCD Elderly/Yl(30-49

National Transfer Accounts

Tradeoff: Spending per Elderly and Tradeoff: Spending per Elderly and Number of Elderly, 13 Countries Number of Elderly, 13 Countries

2 3 4 5 6 7 8 9 10 11 12 0.1 0.15 0.2 0.25 0.3 0.35 0.4 0.45 0.5 Old-age Dependency Ratio: N(60+)/N(20-59) LCD Elderly/Yl(30-49 Ur Jp US Fr Sw CR Tw Th Ch SK Ph In Indo

12

National Transfer Accounts

Summary Summary

► ► Changes in the economic lifecycle may be

Changes in the economic lifecycle may be reinforcing the effects of changes in the reinforcing the effects of changes in the dependency ratio. dependency ratio.

• Earnings by children and the elderly are declining.

Earnings by children and the elderly are declining.

• Spending per child is rising.

Spending per child is rising.

• Spending per elderly is rising.

Spending per elderly is rising.

► ► “

“Costs Costs” ” of children may be declining more slowly

• f children may be declining more slowly

than the number of children; than the number of children;

► ► “

“Costs Costs” ” of the elderly may be increasing more

• f the elderly may be increasing more

rapidly than the number of elderly. rapidly than the number of elderly.

National Transfer Accounts

Issue 2: How do the systems governing inter Issue 2: How do the systems governing inter-

• age economic flows vary and why?

age economic flows vary and why?

► ► Flows to children and the elderly are both important.

Flows to children and the elderly are both important.

► ► Transfers dominate flows to children but the relative

Transfers dominate flows to children but the relative importance of the state and the family vary from country importance of the state and the family vary from country to country. to country.

► ► The elderly rely on public and familial transfers and asset

The elderly rely on public and familial transfers and asset-

• based flows

based flows – – income from assets and income from assets and dis dis-

• saving.

saving.

► ► The systems for the elderly vary among countries and are

The systems for the elderly vary among countries and are changing substantially over time changing substantially over time

• Public policy (pension and health care reform).

Public policy (pension and health care reform).

• Role of the family

Role of the family – – decline in extended family. decline in extended family.

• Development of financial sector.

Development of financial sector.

13

National Transfer Accounts

Old-age Reallocation System, Selected Countries.

Familial transfers equally important in Thailand, Korea, and Taiwan (36-40%). Net familial transfers near zero in US, CR, and J. Large public transfers in CR and

• J. More reliance on

assets in US. Net public transfers to elderly are zero in Thailand; about 25% in Taiwan and Korea.

National Transfer Accounts

Old-age Reallocation System, 65 to 85-year-olds, Taiwan, 2003.

50 75 100 75 75 50 50 25 25 25 100 100 Asset-based (%) Public transfers (%) Family Transfers (%)

65-year-olds 67% assets, 2% public, 32% private 85-year-olds 23% assets, 39% public, 38% private

14

National Transfer Accounts

Old-age Reallocation System, 65-85-year-olds, Taiwan, 2003.

50 75 100 75 75 50 50 25 25 25 100 100 Asset-based (%) Public transfers (%) Family Transfers (%)

From ages 65 to 80, familial share varies

• little. Public rising

and asset-based declining. After 80 familial share is rising and asset-based declining.

National Transfer Accounts

Old-age Reallocation System, 75-year-olds, Taiwan, 1977-2003.

50 75 100 75 75 50 50 25 25 25 100 100 Asset-based (%) Public transfers (%) Family Transfers (%) 1995-2003 1977-1994

Asset-based reallocations and public transfers have increased

• ver time; familial

transfers have declined precipitously. NIH began in 1995; net public transfers increased.

15

National Transfer Accounts

Summary Summary

► ►Old

Old-

• age support systems

age support systems

• Vary widely across countries

Vary widely across countries

• Vary with the age of the elderly

Vary with the age of the elderly

• Are changing rapidly

Are changing rapidly

► ►Familial support system

Familial support system

• Declined in Taiwan

Declined in Taiwan

• Similar to Korea and Thailand in importance

Similar to Korea and Thailand in importance

• In Japan, the elderly make net transfers to their

In Japan, the elderly make net transfers to their children and grandchildren. children and grandchildren.

National Transfer Accounts

Concluding Remarks Concluding Remarks

► ► Difficult to construct National Transfer Accounts.

Difficult to construct National Transfer Accounts.

► ► Estimates presented here are preliminary.

Estimates presented here are preliminary.

► ► Over time we will refine the methodology and

Over time we will refine the methodology and compile an extensive set of data for many compile an extensive set of data for many countries. countries.

► ► Understanding the role of age in the economy is

Understanding the role of age in the economy is essential to developing appropriate policy essential to developing appropriate policy – – both both economic and population policy. economic and population policy.

16

National Transfer Accounts

Acknowledgements Acknowledgements

► ►National Institute on Aging R01

National Institute on Aging R01-

• AG025488.

AG025488.

► ►United Nations Population Fund

United Nations Population Fund – – Asia Asia’ ’s s dependency transition: Intergenerational dependency transition: Intergenerational equity, poverty alleviation and public policy equity, poverty alleviation and public policy

► ►Ronald Lee, Co

Ronald Lee, Co-

• Principal Investigator

Principal Investigator

► ►Naohiro

Naohiro Ogawa, Principal Investigator for Ogawa, Principal Investigator for UNFPA Asia Regional Project UNFPA Asia Regional Project

National Transfer Accounts

The National Transfer Accounts project is a collaborative effort of East-West Center, Honolulu and Center for the Economics and Demography of Aging, University of California - Berkeley

Takayesu Takayesu, Ann , Ann Boe Boe, Carl , Carl Comelatto Comelatto, Pablo , Pablo Sumida, Comfort Sumida, Comfort Schiff, Eric Schiff, Eric Stojanovic Stojanovic, Diana , Diana Langer, Ellen Langer, Ellen Chawla Chawla, , Amonthep Amonthep Pajaron Pajaron, Marjorie , Marjorie Cinco Cinco Lee, Ronald, Co Lee, Ronald, Co-

• Director

Director Mason, Andrew , Co Mason, Andrew , Co-

• Director

Director Auerbach Auerbach, Alan , Alan Miller, Tim Miller, Tim Lee, Sang Lee, Sang-

• Hyop

Hyop Donehower Donehower, Gretchen , Gretchen Ebenstein Ebenstein, , Avi Avi Wongkaren Wongkaren, , Turro Turro

17

National Transfer Accounts

Japan Key Institutions: Nihon University Population Research Institute and the Statistics Bureau of Japan, Tokyo, Japan. Ogawa, Naohiro, Country Leader Matsukura, Rikiya Maliki Obayashi, Senichi Kondo, Makoto Fukui, Takehiro Ihara, Hajime Suzuki, Kosuke Akasaka, Katsuya Moriki, Yoshie Makabe, Naomi Ogawa, Maki

National Transfer Accounts

Australia Key Institution: Australia National University Jeromey Temple, Country Leader Brazil Turra, Cassio, Country Leader Lanza Queiroz, Bernardo Renteria, Elisenda Perez Chile Key Institution: United Nations Economic Commission for Latin America and the Carribean, Santiago, Chile Bravo, Jorge, Country Leader

18

National Transfer Accounts

Taiwan Key Institution: The Institute of Economics, Academia Sinica, Taipei, Taiwan. Tung, An-Chi, Country Leader Lai, Mun Sim (Nicole) Liu, Paul K.C. Andrew Mason China Key Institution: China Center for Economic Research, Beijing, China. Ling, Li, Country Leader Chen, Quilin Jiang, Yu

National Transfer Accounts

France Wolff, Francois-Charles, Country Leader Bommier, Antoine Thailand Key Institution: Economics Department, Thammasat University. Phananiramai, Mathana, Country Leader Chawla, Amonthep (Beet) Inthornon, Suntichai India Key Institution: Institute for Social and Economic Change, Bangalore Narayana, M.R., Country Leader Ladusingh, L. Mexico Key Institution: Consejo Nacional de Población Partida, Virgilio, Country Leader Mejía-Guevara, Iván

19

National Transfer Accounts

Indonesia Key Institution: Lembaga Demografi, University of Indonesia, Jakarta, Indonesia. Maliki, Country Leader Wiyono, Nur Hadi Nazara, Suahasil Chotib Philippines Key Institution: Philippine Institute for Development Studies. Racelis, Rachel H., Country Leader Salas, John Michael Ian S. Sweden Key Institution: Institute for Future Studies, Stockholm, Sweden. Lindh, Thomas, Country Leader Johansson, Mats Forsell, Charlotte

National Transfer Accounts

Uruguay Bucheli, Marisa, Country Leader Furtado, Magdalena South Korea An, Chong-Bum , Country Leader Chun, Young-Jun Lim, Byung-In Kim, Cheol-Hee Jeon, Seung-Hoon Gim, Eul-Sik Seok, Sang-Hun Kim, Jae-Ho

20

National Transfer Accounts

Austria Key Institution: Vienna Institute of Demography Fuernkranz-Prskawetz, Alexia, Country Leader Sambt, Joze Costa Rica Key Institution: CCP, Universidad de Costa Rica Rosero-Bixby, Luis, Country Leader Slovenia Sambt, Joze, Country Leader Hungary Key Institution: TARKI Social Research Institute Gal, Robert Medgyesi, Marton Finland Key institutions: The Finnish Center for Pensions And the Finnish Pension Alliance Vanne, Reijo Gröhn, Jukka Vaittinen, Risto

National Transfer Accounts

United States Key Institution: Center for the Economics and Demography of Aging Lee, Ronald, Country Leader Miller, Tim Ebenstein, Avi Boe, Carl Comelatto, Pablo Donehower, Gretchen Schiff, Eric Langer, Ellen

21

National Transfer Accounts

Kenya Mwabu, Germano Nigeria Soyibo, Adedoyin

N National

ational T

Transfer

ransfer A

Accounts

ccounts

Thank you Thank you

1

Population Aging and Changing Intergenerational Transfers：Lessons from Japanese Experience

Naohiro Ogawa, Maliki, and Naohiro Ogawa, Maliki, and Rikiya Matsu Rikiya Matsukura ura Nihon University hon University Population Research Population Research Institute Institute Tokyo, Japan Tokyo, Japan

In 2005, Japan became No.1 in the world

in terms of the proportion 65 and over (20.1% ) Population shrinking for two years in a row since 2005

2

Fertility

The most important demographic source of population aging

0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 1947 1951 1955 1959 1963 1967 1971 1975 1979 1983 1987 1991 1995 1999 2003 Year Birth Ideal number of children TFR

Total fertility rate (TFR) and ideal family size, Japan, 1947-2005

Is it too late?

Japanese Government was aware of it!

Not many people know it!

3

I f today’s marriage market remains unchanged, 30% men will remain unmarried…

Education Occupation Income Age Coresiding with parent(s) Parent’s property

Change in score for mate-selection criteria among single women between 1988 and 1998

4

10 20 30 40 50 60 70 80 Age 15-19 Age 20-24 Age 25-29 Age 30-34 Regular employees in 1992 Irregular employees in 1992 Regular employees in 2002 Irregular employees in 2002

Proportion of those married among regular and non-regular employees （males，1992，2002）

(%)

Source: Japanese Ministry of Health, Labour and Welfare, 2006, White Paper on Labour and Economy 2006. Age group

As a result of massive economic restructuring,

the lack of job

• pportunities

became one of the main social issues in the 1990s.

5

Employment ratio after graduate from university

10 20 30 40 50 60 70 80 90 100 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 Year % Male Female

Number of freeters and NEETs

（in 10,000 persons） Source： Cabinet Office, 2003, White Paper on National Lifestyle 2003. Cabinet Office, 2005, Survey on Young People not in Employment (interim report). Year

Freeters NEETs

6

Source： Japan Productivity Center for Socio-Economic Development and Junior Executive Council of Japan (2007) Survey Report

• n the Perception and Behavior among Those Newly Employed in 2007.

Proportion of new employees (men or women) who would cancel a date

(%)

and go to work instead when asked to work overtime, 1991-2007, Japan

Year

Women Men

Since the early 1990s, the proportion of single women who are not dating has been stable around 45%

Are young Japanese men not sexy enough?

7

There are more than 3100 match-making firms in Japan!

• Some of them have

branch offices in Singapore.

8

10 15 20 25 30 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Number of children Number of cats and dogs

Number of pets and children, 1994-2006, Japan

(in millions)

Mortality

Increasingly important demographic source of population aging More dominant than fertility reduction since 2005!

9

Change in average age of death among 100 oldest persons by sex, Japan, 1950-2003

Women Men

50000 100000 150000 200000 250000 300000 350000 400000 450000 1970 1975 1980 1985 1990 1995 2000 Year 10 million yen

Pension Medical care Others

Growth of expenditure under the social security system

10

The government debt Olympics: world record holders

Japan 2000 Germany 1921 New Zealand 1983 Mexico 1981 UK 1975 Sweden 1981 Australia 1983 Canada 1993 Italy 1991 Ireland 1984 UK 1947 The Ratio of debt balance to tax revenue 500 1000 1500 2000

Source: Japan's Financial Mt. Fuji: Treating Economic Stability, American Enterprise Institute, 2000

Coresidence is Japan’s latent assets for taking care of the elderly.

Wishful thinking?

11

Deteriorating Familial Support

Education Occupation Income Age Coresiding with parent(s) Parent’s property

Change in score for mate-selection criteria among single women between 1988 and 1998

12

• 55% of Japanese

housewives living coresiding husband’s parents are thinking…

• 20% higher divorce

risk if…

For young Japanese women, to coreside or not to coreside, that’s the question!

13

Suicide rates by household type (age 60 and over, per 100,000 people)

(persons) Source: Economic Planning Agency, 1994, White Paper on the National Lifestyle. 10 20 30 40 50 One-person household Elderly household Other (Coresiding household)

Figure 3. Changes in the proportion of 60+ living in three-generational households, selected countries, 1981-2001

Thailand Japan South Korea Italy France Germany U.S.

14 Change in the place of deaths among the elderly in Japan, 1965-2003

Source: Ministry of Health, Labour and Welfare, Vital Statistics, various years.

%

Figure 2. The growth of medical costs for selected components, nominal value, Japan, 1960-2004

• 5

10 15 20 25 30 35

1960 1965 1970 1975 1980 1985 1990 1995 2000

Year

Trillion Yen

Medical Care Insurance Govenrment Outlay on Health - National Account NME without Personal Expenses Medical Service for the Aged Long Term Care Insurance

15

Panel B: Monthly per capita private health: estimated by regression method, real value (base year = 2000) 2 4 6 8 10 12 14 16 18 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 Thousand Yen 2004 1989 1999 1994

50000 100000 150000 200000 250000 300000 350000 400000 450000 1970 1975 1980 1985 1990 1995 2000 Year 10 million yen

Pension Medical care Others

Growth of expenditure under the social security system

16

1955

40-59 Women 65-84

2.0- 1.5-2.0 1.0-1.5 0.75-1.0 0.5-0.75 0.5-

1975

40-59 Women 65-84

2.0- 1.5-2.0 1.0-1.5 0.75-1.0 0.5-0.75 0.5-

17

2000

40-59 Women 65-84

2.0- 1.5-2.0 1.0-1.5 0.75-1.0 0.5-0.75 0.5-

2025

40-59 Women 65-84

2.0- 1.5-2.0 1.0-1.5 0.75-1.0 0.5-0.75 0.5-

18

20 40 60 80 100 120 140 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 Year

Family support ratio (Women 40-59 / 65-84), 1995-2050

Immigration

Any signal of policy changes?

19

Number of foreign workers and their proportion in Japan's total labor force, 1990-2003

10 20 30 40 50 60 70 80 1990 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 1 2 Number of foreign workers Proportion of foreign workers in total labor force

Ten thousand persons

(%)

20

EPA: As a first step, starting from 2008, up to 1,000 Filipino nurses and caregivers (400 nurses and 600 caregivers) will be accepted over the course of 2 years In addition, new developments with Malaysia, Thailand, and Indonesia are under way.

Newest Developments

21

Sudden Value Shift

Year

Trends in Norms and Expectations about Care for the Elderly: Japan, 1950-2004

"Good Custom" or "Natural Duty“

Expect to Depend on Children

22

Trends in average days of hospitalization in OECD countries, 1960-2003

Source: OECD, OECD Health Data 2005, 2005.

Let us look at the impact of population aging in postwar Japan

23

Here comes… the most important graph in Japan!

Japan’s Most Important Graph

2004

50 100 150 200 250 300 350 400 450 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 Age Thousand yen

24

Mont hly per capit a product ion and consumpt ion, 1984, 1989, 1994, 1999, and 2004, t housand Yen

50 100 150 200 250 300 350 400 450 500 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 Age Thousand yen

Monthly per capita production in 1984, thousand yen

Monthly per capita production and consumption, 1984, 1989, 1994, 1999, and 2004, thousand Yen

50 100 150 200 250 300 350 400 450 500 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 Age Thousand yen

Y 84 Y 89

Monthly per capita production in 1984 and 1989, thousand yen

25

Monthly per capita production and consumption, 1984, 1989, 1994, 1999, and 2004, thousand Yen

50 100 150 200 250 300 350 400 450 500 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 Age Thousand yen

Y 84 Y 89 Y 94

Monthly per capita production in 1984, 1989, and 1994, thousand yen

Monthly per capita production and consumption, 1984, 1989, 1994, 1999, and 2004, thousand Yen

50 100 150 200 250 300 350 400 450 500 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 Age Thousand yen

Y 84 Y 89 Y 94 Y 99

Monthly per capita production in 1984, 1989, 1994, and 1999, thousand yen

26

Monthly per capita production and consumption, 1984, 1989, 1994, 1999, and 2004, thousand Yen

50 100 150 200 250 300 350 400 450 500 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 Age Thousand yen

Y 84 Y 89 Y 94 Y 99 Y 04

Monthly per capita production in 1984, 1989, 1994, 1999, and 2004 thousand yen

Mont hly per capit a product ion and consumpt ion, 1984, 1989, 1994, 1999, and 2004, t housand Yen

50 100 150 200 250 300 350 400 450 500 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 Age Thousand yen

Monthly per capita consumption in 1984, thousand yen

27

1984

50 100 150 200 250 300 350 400 450 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 Age Thousand yen Education (private) Education (public) Health (private) Health (public) Others (private) Others (public) Durable (private) Housing (private) Other Social Program (public) Capital (public)

Monthly per capita production and consumption, 1984, 1989, 1994, 1999, and 2004, thousand Yen

50 100 150 200 250 300 350 400 450 500 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 Age Thousand yen

C 84 C 89

Monthly per capita consumption in 1984 and 1989, thousand yen

28

Monthly per capita production and consumption, 1984, 1989, 1994, 1999, and 2004, thousand Yen

50 100 150 200 250 300 350 400 450 500 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 Age Thousand yen

C 84 C 89 C 94

Monthly per capita consumption in 1984, 1989, and 1994, thousand yen

Monthly per capita production and consumption, 1984, 1989, 1994, 1999, and 2004, thousand Yen

50 100 150 200 250 300 350 400 450 500 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 Age Thousand yen

C 84 C 89 C 94 C 99

Monthly per capita consumption in 1984, 1989, 1994, and 1999, thousand yen

29

Monthly per capita production and consumption, 1984, 1989, 1994, 1999, and 2004, thousand Yen

50 100 150 200 250 300 350 400 450 500 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 Age Thousand yen

C 84 C 89 C 94 C 99 C 04

Monthly per capita consumption in 1984, 1989, 1994, 1999, and 2004, thousand yen

2004

50 100 150 200 250 300 350 400 450 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 Age Thousand yen Education (private) Education (public) Health (private) Health (public) Others (private) Others (public) Durable (private) Housing (private) Other Social Program (public) Capital (public)

30

Monthly per capita production and consumption, 1984, 1989, 1994, 1999, and 2004, thousand Yen

50 100 150 200 250 300 350 400 450 500 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 Age Thousand yen

C 84 Y 84 C 89 Y 89 C 94 Y 94 Y 99 C 99 C 04 Y 04

Monthly per capita production and consumption in 1984, 1989, 1994, and 1999, and 2004, thousand yen

Crossing ages

59 26 Thailand (1996) 56 24 Costa Rica (2004) 58 28 Indonesia (1996) 56 24 Taiwan (1998) 56 26 US (2000) 59 28 Japan (2004) 59 27 Japan (1999) 59 26 Japan (1994) 59 25 Japan (1989) Older Age Younger Age Crossing ages for consumption and labor income Y(x) > C(x) Country

31

Japan’s most important graph reflects a host of vital economic and social factors

Changing earnings profile Hours worked Women’s labor force participation Sectoral allocation of the labor force Child care and old age leave Pension benefits Freeters and Neets Enrollment rates in tertiary education Change in retirement age Change in the remuneration system Parasite singles

32

49.0 51.0 53.0 55.0 57.0 59.0 61.0 63.0 65.0 67.0 1965 1970 1975 1980 1985 1990 1995 2000 Year Year Retirement age Male life expectacy at age 20 Female life expectancy at age 20

Change in retirement age at large-scale businesses and life expectancies at age 20 for men and women: Japan, 1965-2002

University enrollment rate

10 20 30 40 50 60 1954 1959 1964 1969 1974 1979 1984 1989 1994 1999 2004 Yea % Male Female

33

Hours worked (month):1976-2005 150 160 170 180 190 200 210 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 Year Hours (month) Male Female

Now let us pay attention to look at the changing pattern of lifecycle deficits

34

Figure 12. Changing pattern of reallocation of the lifecycle deficits for Japan, 1984 to 2004 Panel A: Population-weighted reallocation of lifecyle deficits, 1984

• 8
• 6
• 4
• 2

2 4 6 8 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 Age Trillion yen Asset Reallocations Public Transfers Private Transfers Panel B: Population-weighted reallocation of lifecyle deficits, 1994

• 8
• 6
• 4
• 2

2 4 6 8 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 Age Trillion yen Asset reallocations Public transfers Intervivos transfers

35

Panel C: Population-weighted reallocation of lifecyle deficits, 2004

• 8
• 6
• 4
• 2

2 4 6 8 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 Age T rillipn ye n Asset reallocations Public transfers Intervivos transfers

0.0 0.2 0.4 0.6 0.8 1.0 0.0 0.2 0.4 0.6 0.8 1.0 0.0 0.2 0.4 0.6 0.8 1.0 Public transfers Family transfers Asset-based

• 0.2

Old-age reallocation system, 65+, Japan 1984-2004

36

0.0 0.2 0.4 0.6 0.8 1.0 0.0 0.2 0.4 0.6 0.8 1.0 0.0 0.2 0.4 0.6 0.8 1.0 Public transfers Family transfers Asset-based

Old-age reallocation system, 85+, Japan 1984-2004 0.0 0.2 0.4 0.6 0.8 1.0 0.0 0.2 0.4 0.6 0.8 1.0 0.0 0.2 0.4 0.6 0.8 1.0 Public transfers Family transfers Asset-based

• 0.2

Old-age reallocation system, 65-85, Japan, 1984

37

0.0 0.2 0.4 0.6 0.8 1.0 0.0 0.2 0.4 0.6 0.8 1.0 0.0 0.2 0.4 0.6 0.8 1.0 Public transfers Family transfers Asset-based

• 0.2

Old-age reallocation system, 65-85, Japan, 1989

0.0 0.2 0.4 0.6 0.8 1.0 0.0 0.2 0.4 0.6 0.8 1.0 0.0 0.2 0.4 0.6 0.8 1.0 Public transfers Family transfers Asset-based

• 0.2

Old-age reallocation system, 65-85, Japan, 1994

38

0.0 0.2 0.4 0.6 0.8 1.0 0.0 0.2 0.4 0.6 0.8 1.0 0.0 0.2 0.4 0.6 0.8 1.0 Public transfers Family transfers Asset-based

• 0.2

Old-age reallocation system, 65-85, Japan, 1999

0.0 0.2 0.4 0.6 0.8 1.0 0.0 0.2 0.4 0.6 0.8 1.0 0.0 0.2 0.4 0.6 0.8 1.0 Public transfers Family transfers Asset-based

• 0.2

Old-age reallocation system, 65-85, Japan, 2004

39

The Japanese elderly are:

largely public goods?

Japanese children are:

predominantly private goods?

Now let us look at the net transfer flow by sector

40

Net transfers flow by sector, trillion yen, 1984

• 4
• 3
• 2
• 1

1 2 3 4 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 61 64 67 70 73 76 79 82 85 88

AGE

Public Education Private Education Public Health Private Health Public Pension

Net transfers flow by sector, trillion yen, 1989

• 4
• 3
• 2
• 1

1 2 3 4 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 61 64 67 70 73 76 79 82 85 88 Public Education Private Education Public Health Private Health Public Pension

41

Net transfers flow by sector, trillion yen, 1994

• 4000
• 3000
• 2000
• 1000

1000 2000 3000 4000 1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 61 65 69 73 77 81 85 89 Public Education Private Education Public Health Private Health Public Pension

Net transfers flow by sector, trillion yen, 1999

• 4000
• 3000
• 2000
• 1000

1000 2000 3000 4000 1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 61 65 69 73 77 81 85 89 Public Education Private Education Public Health Private Health Public Pension

42

Net transfers flow by sector, trillion yen, 2004

• 4000
• 3000
• 2000
• 1000

1000 2000 3000 4000 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 61 64 67 70 73 76 79 82 85 88 Public Education Private Education Public Health Private Health Public Pension

Per capita net transfers flow by sector, thousand yen, 1984

(250) (200) (150) (100) (50)

• 50

100 150 200 250 1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 61 65 69 73 77 81 85 89 AGE Public Education Private Education Public Health Private Health Public Pension

43

Per capita net transfers flow by sector, thousand yen, 1989

(250) (200) (150) (100) (50)

• 50

100 150 200 250 1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 61 65 69 73 77 81 85 89 Public Education Private Education Public Health Private Health Public Pension

Per capita net transfers flow by sector, thousand yen, 1994

(250) (200) (150) (100) (50)

• 50

100 150 200 250 1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 61 65 69 73 77 81 85 89 Public Education Private Education Public Health Private Health Public Pension

44

Per capita net transfers flow by sector, thousand yen, 1999

(250) (200) (150) (100) (50)

• 50

100 150 200 250 1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 61 65 69 73 77 81 85 89 Public Education Private Education Public Health Private Health Public Pension

Per capita net transfers flow by sector, thousand yen, 2004

(250) (200) (150) (100) (50)

• 50

100 150 200 250 1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 61 65 69 73 77 81 85 89 Public Education Private Education Public Health Private Health Public Pension

45

Finance of consumption, old dependents (age 65+) of selected countries

• 20%

0% 20% 40% 60% 80% 100% Japan, 2004 US, 2000 Thailand, 1998 Indonesia, 1996

Policy I mplications using NTA results

46

Pronatalist favorite assertion:

• Only 3.6% of social security

benefits is children-specific; while

• 70.4% of social security benefits is

for the elderly (60+ )

Ratio of Transfers Received by Elderly/Children Based upon NTA

1.04 0.48 1.42 0.66 1984 2.92 2.07 1.55 0.96 Aggregates Public transfers on health, education, and pension 2.23 1.55 1.16 0.7 Aggregates Per capita Per capita 1.73 1.51 1.46 1.18 Total transfers, both intervivos and public on health, education, and pension 2.27 2.01 1.95 1.62 2004 1999 1994 1989

47

• 8000
• 6000
• 4000
• 2000

2000 4000 6000 8000 10000 12000 1984-89 1989-94 1994-99 1999-04 Period Billion yen Pop 0-19 Pop 20-64 Pop 65+ Institution 0-19 Institution 20-64 Institution 65+

Decomposition of public medical expenditure

Decomposition of private medical expenditure

• 1500
• 1000
• 500

500 1000 1500 2000 2500 3000 1984-89 1989-94 1994-99 1999-04 Period Billion yen Pop 0-19 Pop 20-64 Pop 65+ Institution 0-19 Institution 20-64 Institution 65+

48

Possible solutions to population aging problems in Japan

Policy options available to Japan:

(1) raising fertility and facilitating higher labor force participation of women, (2) better utilization of aged workers and extension of the retirement age, (3) labor-saving technology and more efficient use of young workers, (4) international migration, (5) direct foreign investment, (6) social security reform and limits to family support, and (7) effective utilization of the demographic dividends

49

• 1.0
• 0.5

0.0 0.5 1.0 1.5 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 Year %

Figure 8. Trend in first dividend in Japan, 1920-2025

• 2

2 4 6 8 10 12 14 1947 1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002 Year %

Korean war High economic growth (Golden 60s)

Vogel’s “Japan as No. 1” published

Bursting of the bubble economy Universal coverage of medical and pension programs Lost decade

Trend in real GDP growth rate: Japan, 1948-2004

50

Trend in second dividend in Japan, 1950-2050

• 1.5
• 1.0
• 0.5

0.0 0.5 1.0 1.5 2.0 2.5 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 Year %

Growth of reserved funds for all public pension schemes combined, 1965-2002

Source: Ministry of Health, Labour and Welfare, Financial Report on the Public Pension System: Fiscal Year 2003, 2004.

51

Figure 13. Age profile of assets and pension wealth in Japan, 1999

10 20 30 40 50 60 60 65 70 75 80 85 90 95 Age Million yen Financial assets reak assets Present value of future pension benefits

Accumulated wealth for those aged 60-90 1250 trillion yen US $12.5 trillion

52

Accumulated wealth can be invested abroad

Figure 11. First demographic dividend in selected Asian countries, 1950-2050

Note: Computed by authors.

• 0.015
• 0.01
• 0.005

0.005 0.01 0.015 0.02 0.025 Profile 1959 1969 1979 1989 1999 2009 2019 2029 2039 2049 Year Growth rate Philippines Indonesia Thailand India Singapore Malaysia Republic of Korea

53

Figure 12. Second demographic dividend in selected Asian countries, 1950– 2050

Note: Computed by authors.

• 0.08
• 0.06
• 0.04
• 0.02

0.02 0.04 0.06 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 Year Growth rate Philippines Indonesia Thailand India Singapore Malaysia Korea

Caution

OECD’s warning! 71 % of Japanese adults have no knowledge about investment in equities and bonds

54

Caution

OECD’s warning! 57 % of Japanese adults have no knowledge of financial products in general

Financial education is urgently needed

55

Future Japanese elderly persons will be wealthier, healthier and cleverer!

They may become Japan’s valuable assets! More dependable than multigenerational coresidence?

56

Japan NTA team’s next steps

Estimation on time transfer (volunteering time)

Data: Survey on time use and leisure activities Available Variables: Age, Education, Marital status, Activity of caring, Place where own child lives, Normal economic activity, Employment Status, Size of firm, Occupation, Normal working hours per week, Normal commuting time (one-way), etc.

57

Thank you

(Special Thanks to UNFPA!)

National Seminar on Construction of National Transfers Accounts for India

M.R. Narayana Institute for Social and Economic Change, Bangalore &

• L. Ladusingh

International Institute of Population Sciences, Mumbai Bangalore 10 August 2006

Objectives of India’s NTA study

• 1. Construct estimates of public and private National

Transfer Accounts (NTA) for India as can be supported by available data

• 2. Fully document sources of data and estimation

procedures

• 3. Upload document sources of data and estimation

procedures

• 4. Use NTA estimates to conduct research on

intergenerational equity, public policy, family support system, or other related issues

• 5. Collaborate with other project members in the

development and refinement of methodologies

What does NTA mean?

A measure of reallocations or shift of resources from

• ne age group to another, or inter-generational

transfers at the national level of aggregation Reallocations occur because consumption and production differ at different ages of individuals (e.g. production exceeds consumption in working age groups, and consumption exceeds production in childhood and old age dependent age groups NTA documents the means by which those with lifecycle deficits (e.g. young and old) draw on the lifecycle surplus (e.g. generated during working ages)

NTA Institutions

Individual is the fundamental analytic unit in NTA –all transactions are treated as flowing to and from individuals and are classified on the basis of age of individuals Public and private (e.g. families) institutions mediate the individual transactions Thus, all estimations in the NTA, such as, lifecycle deficit, asset reallocations, and transfers are distinguished by public and private sectors

Construction of NTA Flow Account

Flow account measures all flows during the prescribed accounting period. E.g. lifecycle deficits and age allocations Thus, estimation of lifecycle deficit and age allocations are essential for construction of NTA Flow Account In what follows, we present the NTA methodology for estimation of lifecycle deficit; and apply the methodology for India to estimate the lifecycle deficit for the year 1999-00

Lifecycle deficit (LCD)

A measure of total demand for age reallocations Difference between the value of goods and services consumed by members of an age group [C(a)], and the value of goods and services produced by members of an age group [Y(a)]: LCD = {C(a) – Y(a)} Deficit if LCD>0; Surplus if LCD<0 Age groups with deficit support their surplus consumption by generating age reallocation inflows; those with surplus generate age reallocation outflows

Methodology for estimation of LCD

Estimation of LCD involves three steps

• 1. Estimation of aggregate control variables (aggregate

income and consumption)

• 2. Estimation of age allocation of aggregate control

variables

• 3. Determine the lifecycle deficit/surplus by age groups

and overall age groups, as a basis for estimation of

• f age allocations (= asset reallocations + transfers)

Estimation of aggregate controls

Aggregate controls are drawn from National Income and Product Accounts (NIPA) – National Accounts Statistics in India- thus, NTA is consistent with the NIPA NTA requires rearrangement/reformat of NIPA variables, because the individual is the basic analytic entity in the NTA – thus, all aggregate controls have to be rearranged by individual entity

Estimation of aggregate labour income

Aggregate labour income = compensation of employees + (2/3) of mixed income + net compensation of employees from the rest of world Source of data for India India’s National Income Statistics Thus, the definition and measurement of components

• f aggregate labour income in NTA is the same as

being used for estimation of these components in India’s national income

Estimation of aggregate control for consumption

Aggregate consumption = Public consumption + Private consumption (net of indirect taxes) Both public and private consumption are disaggregated by: (a) Education consumption (b) Health consumption (c) Other consumption Source of data for India India’s National Accounts Statistics

Measurement of aggregate control for consumption

Public consumption = Government Final Consumption Expenditure (GFCE) Private consumption = Private Final Consumption Expenditure (PFCE) Private Education consumption = Education expenditure under PFCE Public education consumption = Education expenditure under GFCE Private health consumption = expenditure on medical care and health services under PFCE Public health consumption =expenditure on health under GFCE Private consumption other = expenditure on non-education and non- medical care and health services under PFCE Public consumption other = expenditure on non-education and non-health under GFCE

* Less i nd i r ec t t axes (=Rs .221578 c ro r e) 1297188 1046080 193935 Othe r s 85324 69400 15924 Hea l th 63398 22209 41189 Educa t i

• n

1297188 1046080 251108 AGGREGATE CONSU MPTION* 589 NA NA Net compensa t i

• n
• f

emp loyees f rom RO W 499345 NA NA (2 /3 )

• f

m ixed i ncome • 582357 NA NA Compensa t i

• n
• f

e mployees 1082291 NA NA AGGREGATE LABO UR INCO ME Tota l Pr i va te Pub l i c Var i ab l e

Estimated Aggregate Controls for India, 1999-00

(Rs. in crore at current prices)

Data sources and rules for age allocation of aggregate controls

Age allocation for aggregate control for labour income is estimated by self-employment and wage employment. Age allocation of different components of aggregate consumption are estimated by using the sector-specific databases and household consumer expenditure and employment surveys by the National Sample Survey Organisation. All databases are official and available in the public domain

Allocation rule for aggregate labour income

Allocated according to the age profiles of self- employed and wage and salary employed persons in the National Sample Survey of Employment and Unemployment Survey of India, 1999-00. Survey data comprised non-reported values for self and non-self employed household persons. These non-reported values were replaced by the average value of employed persons’ income by controlling for age and residence.

Labor Income, Compensation and Self-employment, India, 1999-2000 Compensation

Age

Self-employemnt Labor Income 5000 10000 15000 20000 25000 30000 35000 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 Earning in Rs.

Allocation rule for private consumption Private education and health consumption

Private education consumption Allocated by applying the regression technique, and by using private (out-of-pocket) education expenditure data from the National Sample Survey (55th Round) of Consumer Expenditure in India, 1999-00. Private health consumption

Allocated by applying the regression technique, and by using private health expenditure data from the National Sample Survey (55th Round) of Consumer Expenditure in India, 1999-00.

HEALTH – Reg ress ion Me thod

( ) ( )

scale e equivalenc by Again n Consumptio Other N E D E D for N j household

• f

enditure Education H Method gression EDUCATION household jth the in i age

• f

member

• f

enditure health estimated N H H household jth in i age

• f

s individual

• f

No N N j household

• f

enditure Health H

i ji e i e i e j e ji e ji e ji i ji e i e j i ji h i h i e j e j ji i ji h i e j

−       ∗ = = = = − =       = = = =

∑ ∑ ∑ ∑

β β β β β β ˆ ˆ ˆ 1 , exp Re exp ˆ ˆ ˆ . , exp

Allocation rule for private consumption other

Allocated by the technique of Equivalence Scale

FOOD – Equ iva lence Sca l e Fo rmu l a (A p r i

• r

i )

( )

20 , 1 20 4 , 16 20 * 6 . 1 4 , 4 . >= = < <       − − = <= = a a a a a α

Equivalence Scale

0.00 0.20 0.40 0.60 0.80 1.00 1.20 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95

Private Per Capita Consumption by Sector in India, 1999-2000

Age

Health Education Other 200 400 600 800 1000 1200 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 Consumption in Rs.

Allocation rule for education consumption Public education consumption

• Share of enrolment in public education institutions (Government and

local body schools or colleges) is proportional to the attendance rate

• f students in public education institutions within each level of

education.

• Structure of attendance rate in 1999-00 remained the same as in

1995-96.

• Share of aggregate public education consumption is proportional to

share of revenue expenditure on education and training by education and non-education departments within each level of education.

• Per capita public education consumption is uniform within primary,

secondary, and higher education.

• Equal per capita consumption for training and adult education for the

population in the age group 25-59 years. Population by single year in Census of India 2001 is used for estimation of per capita consumption of training and adult education.

Allocation rule for health consumption Public health consumption

• Age specific utilization rates of public

health facilities

• Age specific per head cost of public health

facilities utilization are extracted from the NSSO,2004 healthcare and morbidity survey These age specific rates are applied to 2001 census age distribution and adjusted by NIPA

Per Capita Health Care Expenditure, India by Age Group, 2004 500 1000 1500 2000 2500 0-14 15-24 25-34 35-44 45-54 55-64 65-74 75-84 85+ Age group Expenditure in Rs.

Public Private Total

Allocation rule for public consumption other

Allocated on per capita basis for the entire population

Public Per Capita Consumption by Sector in India, 1999-2000

Age

Health Education Other

50 100 150 200 250 300 350 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95

Consumption in Rs.

Per Capita Consumption, Private and Public by Sector, India, 1999-2000 Public Health Public Education Public Other

Age

Private Health Private Education Private Other 200 400 600 800 1000 1200 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95

Consumption in Rs.

Public and Private Per Capita Consumption in India, 1999-2000

Private

Age

Public 200 400 600 800 1000 1200 1400 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95

Consumption in Rs.

Relative Consumption by Age and Sector, India, 1999-2000

0-19 20-64 65+ 0.2 0.4 0.6 0.8 1 1.2 1.4 Relative to Mean Consumption Age 20-64 Public Other Private Other Public Education Private Education Public Health Private Health

C e n s u s 2 0 0 1

• 4

• 1 4

• 2 4

• 3 4

• 4 4

• 5 4

• 6 4

• 7 4

• 8 4

• 9 4

P o p u l a t i o n

c o ns um e r prpduc e r

30737 184671 553892 240365 72625 1082290 Labor Income 28653 12536 41189 Education 3956 4125 5309 1326 1208 15924 Health 8462 17047 46541 33708 88238 193995 Other 12417 21172 51850 63688 101981 251108 Public consumption 1944 4457 15808 22209 Education 7815 12536 27076 13826 8147 69400 Health 52518 107237 294591 200212 299914 954471 Other 60333 119773 323611 218495 323868 1046080 Private consumption 72750 140945 375460 282183 425850 1297188 Consumption 42013

• 43725
• 178431

41818 353225 214898 Lifecycle deficit 65+ 50-64 30-49 20-29 0-19 Total Groups Age

Estimated Life Cycle Deficit, 1999-00 (Rs. In crore at current prices)

Summary of main results of LCD estimations

First, the LCD is evident for all age groups except for working population in the age group of 30-49 years and 50-64 years. Second, the highest LCD is evident for young age dependents (age group 0-19 years) rather than for old age dependents (age group 65+ years). In fact, the LCD in age group 0-19 years is about 8 times higher than for the old age group (65+ years).

Aggregate Labor Income,Consumption and Deficit for India,1999-2000

Labor Income Deficit Consumption Age

• 20000
• 10000

10000 20000 30000 40000 1 6 11 16 21 26 31 36 41 46 51 56 61 66 71 76 81 86 91 96 Income/Consumption/Deficit(in Crore)

Per Capita Labor Income and Consumption, India, 1999-2000

Labor Income Consumption

26 61

500 1000 1500 2000 2500 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95

Age Income/Consumption in Rs.

Per capita Life Cycle Deficit, India, 1999-2000

Labor Income Consumption

Age

Lifecycle Deficit

• 1500
• 1000
• 500

500 1000 1500 2000 2500

1 6 11 16 21 26 31 36 41 46 51 56 61 66 71 76 81 86 91 96

Labor Income/Consumption/Deficit( in Rs )

Age reallocations in India’s NTA, 1999-00

• 1. Public sector reallocations
• Public sector asset reallocation
• Public transfers
• Private sector reallocation

! Private sector asset reallocation ! Private transfers – Intra and Inter-household transfers ! Bequests

Public sector age reallocation

1.Public asset reallocation: Public asset income – public savings 2.Public transfers: Public transfer inflows - outflows

5195 10725 25827 13428 17475 72649 Other revenues 16542 34153 82241 42758 55646 231340 Direct and indirect taxes 21737 44878 108068 56186 73121 303989 Outflows 25177 21399 5205 1046 53 52880 Cash transfers 12417 21172 51850 63688 101982 251109 In-kind transfers 37594 42572 57055 64733 102035 303989 Inflows 15857

• 2306
• 51013

8547 28915 Public transfers (inflows - outflows) 54373 126602 212329

• 26044
• 180987

186272 Less: Saving (including net public bequests) 69961 112785 77880

• 95366
• 192325
• 27065

Income on Assets 15589

• 13816
• 134449
• 69322
• 11339
• 213337

Public asset based reallocations 65+ 50-64 30-49 20-29 0-19 Total Age distribution

Public age reallocations, 1999-00 (Rs. In crore at current prices)

Aggregate public transfer net inflows, India, 1999-00

• 4000
• 3000
• 2000
• 1000

1000 2000 3000 4000 1 11 21 31 41 51 61 71 81 91 Age Aggregate inflows (Rs. in crore)

Per capita public transfer net inflows, India, 1999-00

• 6000
• 4000
• 2000

2000 4000 6000 8000 10000 1 11 21 31 41 51 61 71 81 91 Age Per capita inflows (Rs.)

23204 13058 14479.6 2201.7 187.992 53132 Inter-household transfers 35860

• 42597
• 158079

21463 294103 150751 Intra-household transfers 59065

• 29539
• 143600

23665 294291 203883 Private Transfers 65+ 50-64 30-49 20-29 0-19 Total Age distribution

Private transfers, 1999-00 (Rs. In crore at current prices)

Aggregate Net Intra-Household Transfer,India,1999-2000

• 15000
• 10000
• 5000

5000 10000 15000 20000 25000 1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 61 65 69 73 77 81 85 89 93 97

Age Familial Transfer(in Crore)

Per Capita Intra-Household Transfer,India,1999-2000

• 1000
• 500

500 1000 1500 1 6 11 16 21 26 31 36 41 46 51 56 61 66 71 76 81 86 91 96

Age

Familial Transfer( in Rs. )

18.81 36.36 9.71 Private asset reallocations 81.19 8.39 69.11 Private transfers 21.80 3.03 6.79 Public transfers 21.43

• 24.57
• 2.66

Public asset reallocations 3.56 85.18 17.05 Labour income 65+ 20-29 0-19 Percent of total consumption Sources of finance of consumption

Major conclusion Source of finance of consumption or LCD

THANK YOU