Preparing for an Aging World The Case for Cross-National Research (2001) / Chapter Skim
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5. Intergenerational Transfers
5. Intergenerational Transfers
Pages 155-199
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From page 155... ...
. As noted above, however, publicly funded transfer programs are not the only source of support for the aged, even in developed countries.
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From page 156... ...
Increasing inheritance taxes for example, may "repay" public transfers in the aggre~In the poorest countries, public transfer programs are rare. Where they exist at all, such benefits are usually restricted to former government workers.
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From page 157... ...
The chapter then examines efforts to model and project family dynamics, including changes in such variables as kin availability, living arrangements, and changing family structures, factors that will assume increasing importance for policy making as societies age. Both micro- and macrosimulation procedures may be useful tools in gauging future policy needs.
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From page 158... ...
Does parental wealth create comparable transfer incentives across cultures? To what extent are incentives for children to repay their parents for human capital investment sensitive to tax policies and to state-provided service systems?
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From page 159... ...
For example, will the modest university fees now being levied in the United Kingdom appreciably reduce savings for old age? To what extent are preferences for human capital investment at the expense of individual consumption or savings culturally determined or responsive to policy?
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From page 160... ...
These age-specific measures, summed across individuals of each age or households headed by persons of each age, yield familiar aggregate measures of consumption, labor income, and so on that appear in conventional national income accounts. The aggregate age-specific measures are derived from a variety of underlying sources, including survey data on consumer expenditures, labor earnings or intrafamily transfers, and administrative records of tax payments and beneficiary payments.
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From page 161... ...
For example, transfers through the family may take the form of parental expenditures on children or old-age support provided by children for their parents; transfers through the public sector may involve tax-supported public education or pay-as-you-go social security programs; and implicit intergenerational transfers may take place through credit markets if lenders, on average, are either older or younger than borrowers. Changes in the rate of population growth produce an intergenerational transfer effect because they induce a change in the age structure and, hence, alter the relative numbers of people who give or receive trans2The models discussed in this section employ a "comparative steady state" approach in which the long-run demographic and economic structure of a society whose population is growing at, say, 1 percent per year is compared with that of a society whose population is decreasing at a rate of 1 percent per year.
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From page 162... ...
It is important to distinguish between the effects of population aging on the potential economic welfare of the society as a whole and on particular programs within the public sector. For example, the fertility decline that is leading to population aging in the United States and other Western countries may have the long-run effect of increasing potential per capita lifetime consumption if the direction of net intergenerational transfers is from the older to the younger generation.
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From page 163... ...
indicates the effect of higher population growth on the feasible level of per capita lifetime consumption, ignoring capital-dilution effects. The left-pointing arrows indicate 3This model assumes that the society is in a steady-state golden rule equilibrium with a constant rate of population growth equal to the rate of interest.
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From page 164... ...
164 C' A: TC7 E A 1 ~ ~ , .— ~ O En ' ~ ~ ~ . ~ O O U0:it l C\l ~ ~ co I` ~ 1 1 1 1 al O -~0 At At _ O o o ~ = GO Q at At ~ ~ ~ =~ eleG plogasnOH o V)
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From page 165... ...
Second, high-income societies are all experiencing very low rates of population growth and low mortality, so that the proportion of dependent young in these societies is far smaller than in high-fertility societies, while the proportion of dependent aged is much higher. These two factors tend to offset the fact that high levels of human capital investment in education and on-thejob training in the advanced countries result in a shift of individual productivity to later ages.4 Intergenerational Transfers in Developed Countries The mechanisms by which intergenerational transfers take place through social, political, or economic institutions may be examined using modifications of the basic Arthur and McNicoll (1978)
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From page 166... ...
, at the individual level in the lower panel. The difference in the direction of familial and public transfers for the United States in the 1980s is illustrated vividly in Figures 5-2 and 5-3, respectively.
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From page 167... ...
The tail of each arrow is located at the average age of making each kind of transfer in the population, and the head of the arrow is located at the average age of receiving each kind of transfer in the population. The thickness of each arrow represent the per capita (or per household)
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From page 168... ...
Health care costs are the other major source of public-sector intergenerational transfers. These transfers are received by households whose heads average 61.6 years of age and are funded by taxes paid by households whose heads average 42.8 years of age.
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From page 169... ...
While the flow value of $2,342 per year is comparable to the flow value of the social security transfer, the magnitude of the total intergenerational transfer, $17,330 per household, is much smaller because there is only a 7.4 year difference in the average age of household heads who pay education taxes (46.7 years of age) and heads whose households receive public education.
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From page 170... ...
Public transfers also create a potential divergence between the private and social costs of childbearing. As noted earlier, the sign of Ac - Ay, measured at the individual level, indicates whether higher population growth will raise or lower potential lifetime consumption.
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From page 171... ...
by defining intergenerational transfers as a generic term used to describe the redistribution of resources within an extended family structure, incorporating both inter- and intrahousehold exchanges. This focus on the family does not diminish, of course, the need to collect detailed
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From page 172... ...
The top panel in Box 5-1 highlights the need to properly identify the focal elderly unit and the kin network with which exchanges are carried out, and shows the three major "currencies" of transfer space, money, and time. The second panel lists the salient dimensions of each exchange, providing a partial checklist of attributes that might be measured for either individual transfers or classes of transfer.
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From page 173... ...
From a practical standpoint, identifying the kin network in detail often makes it easier to record the exchanges that take place with specific members and
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From page 174... ...
Another important concern is how long each member has lived in the current household, which together with information about the elderly respondent's own moves, can reveal whether the 7A variety of grid-like survey instruments have proven useful in recording the multiplicity of potential exchanges (see, e.g., Hermalin, 2000~. Where feasible, computer-assisted interviewing, either in person or by telephone, opens up many possibilities for keeping track of various classes of individuals.
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From page 175... ...
. For other relatives beyond children and parents, it is often necessary in the interest of time to obtain summary information, which can still provide insights into the size and strength of the kin network.
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From page 176... ...
Should the focus be on what the couple does or what the particular respondent does in terms of financial assistance, taking care of grandchildren, assisting children, and so on? Measuring and Recording Exchanges In the previous section we indicated how information on the transfer of space through living arrangements can be gathered in the course of obtaining details about household structure.
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From page 177... ...
Measuring need is a critical aspect of understanding intergenerational transfers since we expect the existence of need and its extent to be a prime determinant of the provision of support. There are different strategies for establishing need, and the approach used can vary with the type of support involved.
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From page 178... ...
Increasingly, older parents provide child care for their grandchildren to assist working couples, and they often provide companionship as well as care to their own elderly parents. Understanding still another aspect of time transfers involves identifying the nature of emotional support and companionship received by the respondent (such as satisfaction with the willingness of family members to listen to worries and problems, accompaniment in outside-the-home activities, the degree to which respondents feel loved and cared for, and the degree to which family members can be counted on for care during illness)
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From page 179... ...
Summary of Key Measurement Issues The intent of the above discussion is not to propose a model questionnaire, but to suggest reasonable strategies for obtaining the salient information about intergenerational transfers within the confines of a survey. As more attention is focused in this area, it is likely that consensus will emerge as to the most efficient means of pursuing the critical variables.
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From page 180... ...
ASSESSING FAMILY DYNAMICS AND THEIR IMPLICATIONS FOR FUTURE TRANSFER PATTERNS Understanding and mapping the complexities of kin networks and transfer patterns is an important step in policy development. Determining how best to use such information to project future trends is the new policy frontier in many countries.
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From page 181... ...
Clearly, planning for aging societies needs to take into account how ongoing demographic changes will alter the nature of families and households and affect intergenerational transfers (Zeng,1988~. How many elderly persons likely will live alone, with a spouse only, or with children or other relatives or be institutionalized in the future (Grundy, in press)
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From page 182... ...
However, the most problematic feature of the headship-rate method is that it lumps all household members other than heads into an extremely heterogeneous group of "nonheads." This categorization obviates the study of family life courses and intergenerational transfers between children and other nonheads. To address the need for more detailed and realistic information on family structure and behavioral patterns, the study of population aging is increasingly concerned with mapping and modeling kin availability.
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From page 183... ...
Results indicated that continued demographic changes in developed countries would increase the proportion of elderly without living offspring. Among those elderly persons with living offspring, the average age of those offspring is approaching (or in some cases has reached)
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From page 184... ...
conducted a study of the effect of persistent low fertility in Italy on shrinking kin networks for the period 1994-2050. Throughout the simulation period, some 15 to 20 percent of Italian women aged 25-45 are the only living offspring of their surviving mothers and thus are potentially fully responsible for their mothers' care.
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From page 185... ...
, \ / \ ,''' ~ '\\\ ,- ~ \ \ ,/ ,- / Biological children , ~ ~ \ \ \ \ \ 1980 1990 2000 2010 2020 2030 FIGURE 5-4 Living biological and stepchildren for whites aged 70-85 in the United States: 1980 to 2030. NOTE: Based on the output of Berkeley SOCSIM simulations, averages of 40 repl~cahons.
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From page 186... ...
86 8 6 Q A 4 2 o PREPARING FOR AN AGING WORLD | U.S. Whites Aged 70 to 85 _ ,, - ,, \\ , \ "it "I Biological plus "I stepgrandchildren L- = \\\\ Cal n - 1 1 1 1 1 1980 1990 2000 2010 2020 2030 Year FIGURE 5-5 Living grandchildren for whites aged 70-85 in the United States: 1980 to 2030.
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From page 187... ...
Application of this model to the situation in China showed that the family household structure and living arrangements of the Chinese elderly would change dramatically during the first half of the 21st century; for example, by 2050 the percentage of elderly living alone would be 11 and 12 times larger than that in 1990 in rural and urban areas, respectively. The same model used to project family households and living arrangements in Germany from 1996 to 2040 (see Figure 5-6)
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From page 189... ...
In the former case, saving is reduced by a social security program, while in the latter case, the "Ricardian equivalence theorem" implies that public transfers from younger taxpayers to older retirees will be offset by private transfers from parents to their children, leaving net saving unchanged. Other theoretical models of family transfers and family behavior may produce still other implications.
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From page 190... ...
Parents may divert retirement savings toward investment in their children's human capital in expectation of old-age support from those children. Micromodels Unfortunately, it has been difficult to conduct empirical tests of hypotheses about the effects of public transfer programs and policies on savings or other family behaviors, including fertility, human capital investment in the young, and monetary and time transfers by children to their parents or vice versa.
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From page 191... ...
. By linking reports of transfers given or received to the potential individual exchange partners, these datasets provide opportunities to test hypotheses about donor motivation, reciprocal transfers over time within a given family, substitution of state transfers for family transfers, and net costs and benefits to donors and recipients over time.
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From page 192... ...
In both developing and industrialized countries, demographic, social, and economic changes are likely to have major impacts on public and private transfer systems through their effects on preferences, resources, and the size and structure of the kin network. Rising educational levels, for example, are likely to change the preferences of the future elderly for privacy and the types and amount of leisure desired, inter alla.
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From page 193... ...
The important factors that bear on the combination of intergenerational transfer systems and their interrelationships generally display little variation within a country. However, the mix of transfer programs and their salience vary considerably between developed and developing countries and within each group as well.
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From page 194... ...
The effects of unstable demographic changes on Chinese kinship networks. In Consequences of Rapid Population Growth in Developing Countries, 1750-2250, pp.
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From page 195... ...
Kohli, M 1999 Private and public transfers between generations: Linking the family and the state.
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From page 196... ...
Lee, R.D., and S Lapkoff 1988 Intergenerational flows of time and goods: Consequences of slowing population growth.
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From page 197... ...
Paper prepared for the United Nations Population Division Technical Meeting on Population Ageing and Living Arrangements of Older Persons: Critical Issues and Policy Responses, February, New York. Parish, W.L., and R.J.
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From page 198... ...
Wolf 1999 Shrinking Kin Networks in Italy Due to Sustained Low Fertility. Papers in Microsimulation, Series Paper no.
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From page 199... ...
1988 A theory of the equilibrium rate of interest: Life cycles, institutions and population growth. In Economic Consequences of Alternative Population Patterns, R.D.
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