VID Colloquium
National Transfer Accounts: An introduction to methodology, results and their application to estimate the first and second demographic dividend
Bernhard Hammer, Vienna University of Technology &
Joze Sambt, University of Ljubljana, Faculty of Economics
Date: Thu, 7 July 2011 , Time: 15:00-16:00
National Transfer Accounts (NTA) is a method that estimates and describes the distribution and reallocation of resources across age groups. Children and the elderly consume more than they produce, while the population of working age generates a surplus of labor income over consumption. The “lifecycle deficit” (the shortfall of labor income to cover consumption) of the young and the elderly has to be financed through economic flows across generations. These flows can be in form of public transfers, private transfers or asset based reallocation. The NTA are consistent with the System of National Accounts (SNA), supplementing them with age dimension and extending them with estimations of private transfers.
In the presentation we provide an introduction to the NTA methodology, an overview over the results for Austria and a comparison with the results from other countries. These comparisons show that in Austria young people generate labor income earlier in life than in other countries. On the other hand Austrians retire relative early, already at the age of 59 average labor income falls short of average consumption (Sweden: 63). In Austria asset based reallocations play a comparatively minor role in financing the consumption of the elderly, their lifecycle deficit is mainly financed through public transfers.
We use the data provided by NTA to improve the conventionally defined support ratio, which arbitrarily defines population in working- and non-working-age. However, the ability to produce and consumption needs and wants vary between age-groups, a fact which is ignored in the conventionally defined support ratio. By applying NTA age profiles of consumption and labor income on population projections we calculate the improved version of the support ratio - the ‘NTA support ratio’. Changes in the NTA support ratio are captured by the ‘first demographic dividend’. Population aging can also have a positive economic effect in form of ‘second demographic dividend’, which is depending on how elderly finance their consumption. But with the exception of the UK, under the current settings in European NTA countries the opportunity in form of positive second demographic dividend is expected to be heavily dominated by the challenge of the negative first demographic dividend.
About the presenters
Bernhard Hammer joined the research group Economics at the Technical University of Vienna in July 2010 working on the NTA-project. He studied economics at the University of Vienna and is currently enrolled in the PhD program at the TU and in the master program Statistics at the University of Vienna.