Abstract WP16-05

Transfer systems serve an essential economic function by shifting resources across and within age groups. Children and, in most societies, the elderly meet their material needs by relying heavily on public and private transfers. As population age structure changes, transfer systems must constantly rebalance with profound implications for economic development and generational equity. How changes in age structure will play out over the coming decades varies greatly depending on each country’s position in the demographic transition and its approach toward intergenerational transfers. To explore these issues this paper relies on a new simulation model that closely adheres to the National Transfer Accounts (NTA) framework. Alternative public policies and private sector responses are explored for 10 countries using NTA data. In the four post-dividend countries analyzed (Germany, Hungary, Japan, and the United States) , population aging will severely strain public finances and impede growth in standards of living for all age groups. Life cycle reform, however, is a very effective response. For a few late dividend countries, e.g., China and Brazil, population aging will also create strains. For other countries (India, Mexico, South Africa, and Thailand), however, changes in population age structure should be favorable for several decades creating opportunities for these countries to prepare for the population aging that will eventually come. This paper is part of the NTA/World Bank project: Aging and the Changing Nature of Intergenerational Flows in Developing Countries.