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About NTA

The National Transfer Accounts Project

The NTA Project is a collaborative project to measure, analyze and interpret macroeconomic aspects of age and population aging around the world. The lead institutions are the Center for the Economics and Demography of Aging, University of California at Berkeley and the Population and Health Studies Program, East-West Center. Nihon University Population Research Institute serves as the Asia Regional Center. Country teams consist of senior scholars and graduate students. Ronald Lee and Andrew Mason are co-principal investigators.

Support for this project has been provided by the National Institute on Aging: NIA, R37-AG025488 and NIA, R01-AG025247; the John D. and Catherine T. MacArthur Foundation; the International Development Research Center (IDRC); the United Nations Population Fund (UNFPA); and the Academic Frontier Project for Private Universities: matching fund subsidy from MEXT (Ministry of Education, Culture, Sports, Science and Technology), 2006-10, granted to the Nihon University Population Research Institute.

Definitions and Concepts

The purpose of National Transfer Accounts is to measure at the aggregate level the reallocations of shift of economic resources from one age group to another. These reallocations occur because at some ages, individuals consume more than they produce. At other ages individuals produce more than they consume. The NTA system documents the means by which the young and the old, those with lifecycle deficits, draw on the lifecycle surplus generated during the prime working ages.

The Lifecycle Deficit: LCD(a)

The lifecycle deficit (LCD(a)) measures the total demand for age reallocations as the difference between the value of goods and services consumed by members of an age group, C(a), and the value of goods and services produced by members of an age group, Yl(a).

Age groups with a lifecycle deficit, LCD(a)>0, support their surplus consumption by generating age reallocation inflows. Those with a lifecycle surplus, LCD(a)<0, generate age reallocation outflows.

Source: Mason, Lee, Tung, Lai, and Miller (2005) Working Paper No. 6 (MLTLM2005)

The Age Reallocation Framework

The age reallocation framework distinguishes the economic form of reallocations, asset reallocations and transfers, and the implementing institutions, public and private.

Source: Mason, Lee, Tung, Lai, and Miller (2005) Working Paper No. 6 (MLTLM2005)

Economic Forms of Age Reallocations

Age reallocations come in two economic forms: asset reallocations and transfers.

Asset Reallocations

Asset reallocations consist of all flows associated with the accumulation and dis-accumulation of financial and real assets. Age groups achieve asset reallocation outflows in two ways: by saving, i.e., acquiring an asset, or by paying interest on accumulated debt. Age groups generate asset reallocation inflows by dis-saving, i.e., disposing of an asset, and by earning returns on their accumulated assets in the form of profits, property income, and interest income.

Asset reallocations:

Assets reallocations come in two forms - investment and intertemporal exchange - that differ in their macroeconomic effects and inter-generational features.

Capital reallocations

Capital reallocations are achieved through investment, i.e., the accumulation of reproducible material wealth. Examples are the accumulation of equipment, vehicles, buildings, highways, ports, homes, and consumer durables. Net reallocations are equal to the difference between returns to capital and investment.

Capital reallocations:

Investment is the only form of age reallocation that contributes directly to economic growth. Other forms of reallocations do not lead to an increase in total economic resources.

Investment can only be used to generate upward flows, i.e., to reallocate from younger to older ages. This is because investment requires that capital first be accumulated before it can yield income or be dis-accumulated. Unlike some other assets, capital cannot be negative.

Intertemporal Exchange

Intertemporal exchange involves the trade of an economic resource in one period with compensation in one or more future periods. Exchange does not create aggregate wealth. An increase in the assets of one age group is always balanced by the decline in assets of other age group.

Two forms of exchange can be distinguished. One form is credit transactions in which one age group lends economic resources to another age group, which in turn is obligated to repay the loan and agreed upon interest. A second form of exchange is property transactions - the trade of non-reproducible real assets, e.g., land or gold. Individuals purchase property at one age and sell it in the future at an older age thereby reallocating resources from one age to a later age.

Credit reallocations can be used to generate both upward and downward age reallocations. Students can support consumption in excess of production by borrowing from workers. Young adults can use credit cards to consume in excess of their production. The elderly can support consumption in excess of production by relying on interest payments from credit accumulations or by reducing the amount of credit outstanding.

The importance of credit for achieving age reallocations is limited by the requirement that all credit transactions must net to zero. Workers could in theory make substantial loans to children and rely on the accumulated assets to cover their lifecycle deficit in old age. The demand for debt by children is limited, however, by convention and legal constraints. Hence, there is relatively little demand for credit as an age reallocation vehicle.

Property transactions can only be used to reallocate from younger to older ages. Individuals can accumulate wealth during their working years and dis-accumulate those asets when they are retired. But, as with capital, children cannot meet their lifecycle deficits by dis-accumulating non-reproducible wealth that they have not yet accumulated.

Exchange reallocations:

Transfers

A transfers is an age reallocation for which there is no explicit quid pro quo. Transfers can flow in either direction -- from parents or taxpayers to children, for example, or from adult children and taxpayers to the elderly.

NTA Institutions

The individual is the fundamental analytic unit in NT accounts. All transactions are treated as flowing to and from individuals and are classified on the basis of the age of those individual. Public and private institutions mediate these transactions. Public reallocations are social mandates embodied in law and regulation and implemented by local, regional, and national governments. Private reallocations are voluntary or contractual transactions between individuals, households, firms, and charitable organizations.

The household plays a prominent role in private age reallocations. In virtually every society reallocations to children are dominated by intra-household transfers, and in many countries the elderly live with and are supported by their adult children. Moreover, many assets are held by households rather than by individuals. Even when assets are held by individuals, household surveys rarely provide such information.

Several conventions have been adopted to attribute to individuals transactions that are between or within households. First, all intra-household transfers are assumed to be between the household head and household members. Second, private inter-household transfers are assumed to be between household heads. Third, all household assets are assumed to be held by the household head. Thus, all asset reallocations are attributed to the age group to which the household head belongs.