NTA2020 Mason_b

Global Meeting on Population and the Generational Economy, August 2020

Presentation: Andrew Mason, Aging, Transfers, and Saving


Old age needs can be met by relying on transfers or on asset-based reallocations or on a combination of the two. The purpose of this paper is to compare the flows associated with a transfer system and an asset-based system. Holding the consumption and labor income profiles fixed, net transfers to fund old-age needs rise directly with aging as measured by the old-age gap. Given the same profiles, flows associated with the asset-based system, i.e., saving, must rise earlier in aggregate in order to fund the accumulation of retirement assets. However, as the transition to an aging society is completed, fewer resources must be devoted to increasing assets and saving rates decline. Simply put asset-based systems require heavy up-front costs but pay off in substantially lower costs as the aging transition is completed. Estimates of the flows associated with transfer and asset-based systems are compared based on new estimates of consumption and labor income profiles and population projections from the UN.

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