Sustainable economic policies in an aging world

Abstract

This paper examines the economic implications of population aging in light of new estimates and analysis of the inter-relationships between age and the economy based on the National Transfer Account (NTA) project. The NTA project is an international effort involving research teams from 25 countries coordinated by Ronald Lee, Director of the Center for the Economics and Demography of Aging and myself. An important goal is to develop and apply a system for measuring economic flows across age groups - primarily from the working ages to the dependent ages, childhood and old age. These flows are a natural consequence of the economic lifestyle that characterizes all contemporary societies studied to this point. In all countries the flows are very large, but the systems of reallocating resources across age groups vary considerably from one country to the next. Some countries depend heavily on public transfers; other rely more on familial transfers; and still others place greater emphasis on lifecycle saving. A central thesis of this work is that economic effects of changes in population age structure depend in a critical way on the systems responding to the resource deficits that exist at younger and older ages. Effective policy responses are essential to sustaining standards of living in an aging world.