Abstract.Day2.Mason

Generational Connections, Population Aging, and Sustainable Consumption

Andrew Mason, Naohiro Ogawa, Rikiya Matsukura, Ron Lee, and Gretchen Donehower

Population aging requires shifts in the generational economy that would otherwise lead to large, and impossible, imbalances. Many responses are possible. Labor income could increase if people work longer. Consumption could decline and be spread over a longer life. Transfers could shift with reduced per capita inflows to seniors and higher per capita outflows from younger adults. Seniors and others could save less leading to greater asset-based reallocations that would mitigate the desire for greater consumption. This paper presents a model to quantify the long-run possibilities in the face of changes in population age structure. Analysis using NTA data for Japan from 1984 to 2019 and for the US from 1990 to 2019 shows that current consumption levels are unsustainable in either country. The model considers alternative scenarios varying fertility and mortality, the growth of labor supply, and the reliance on transfers and asset-based reallocations to children and seniors.