Policy in Focus n. 30

Policy In Focus n. 30 Dec 2014



The economic life cycle is characterised by three distinct phases: two phases of economic dependence and one phase of economic independence. In most societies, children consume resources generated by adults, transferred to them by family or by the public sector. The elderly, in turn, possess an accumulation of assets accrued during their active economic phase, and of resources produced and transferred by adults or other credit operations. Over each period of time, every society determines—by social norms, laws and individual decisions—the combination of mechanisms for resource allocation over life cycles. Intergenerational transfers represent a significant portion of the distributed production and time allocation over the life cycle and become increasingly important given the rapid demographic changes that have been happening around the world over the last decades.

This issue of Policy in Focus examines demographic changes, intergenerational transfers and their impacts on economic growth in different countries. The articles cover the experiences of developing and developed countries from the Americas, Africa and Asia. As a common thread, all articles discuss the main features of the intergenerational transfers in their respective countries and make a connection between the public and private intergenerational transfers and demographic change, to analyse the possible impacts on economic growth.

This special issue commences with an article by Ronald Lee and Andrew Mason on the
general features of the National Transfer Accounts project that briefly discusses its main
results. They show how the life cycle deficits of childhood and old age are financed in
different regions and countries of the world.

Queiroz and Turra then investigate the impact of changes in population age structure on
economic growth in Brazil. They show that Brazil is failing to take advantage of the positive impacts of demographic dividends. In the last few decades, the Brazilian economy has grown much more slowly than the demographic dividends alone would predict.

The following articles (Colombia, Chile and Mexico) deal with more specific features of
the intergenerational transfers. Urdinola and Tovar illustrate intergenerational transfers
in Colombia and argue that elevated rates of labour market informality have negative
impacts on public transfers that might undermine potential growth resulting from
demographic changes. Miller, Saad and Holz provide an important analysis of transfers
and inequality in Chile. They show how the pattern of transfers varies widely across socio-economic groups and might have impacts on the well-being of the population. Mejia-Guevara and Saucedo then discuss a specific feature of the public transfers system in Mexico: they analyse public education transfers and how they benefit children.

The remaining articles—encompassing Africa and Asia—also discuss the impacts of
demographic change on economic growth. Murithii et al. show that Kenya can take
advantage of its demographic transition if proper educational and health policies are
in place to increase the productivity of workers. For South Africa, Oosthuizen shows that
the first half of the 70 years’ worth of potential demographic dividends for that country
has already passed, and to benefit from their potential impacts, the country should
invest in policies to improve youth labour market conditions.

Regarding Asia, an article from India shows that to fully benefit from demographic
change, an increase in the age-specific productivity of labour, especially in the informal
sector, is important to maximise the growth effects of the age structure transition.
Furthermore, Matsukura presents the case of Japan, a country with the oldest age structure analysed in this publication. The author shows that Japan must start considering ways to benefit from the second demographic dividend (accumulation of wealth). He argues that the elderly population, normally seen as a liability, is in reality an important actor in the process of economic growth. To conclude the magazine, Maliki argues that, for Indonesia to fully benefit from demographic change, proper policies are needed to boost investment, improve labour market conditions, improve the accumulation of human capital and increase productivity.

We hope that these articles further emphasise the importance of considering the economic life cycle, demographic changes and their economic consequences.

by Bernardo Lanza Queiroz, Ronald Lee and Andrew Mason

See the issue.


Sobre Antonio Carlos Teixeira

Executivo de Comunicação I Assessor Estratégico I Sustentabilidade/Baixo Carbono I Editor I Editor do blog TerraGaia //// Executive of Communication I Strategic Advisor I Sustainability/Low Carbon I Editor I TerraGaia blog Editor.
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