Charting the Economic Life Cycle

Abstract

IntroductionThe shape of the demographic life cycle is of fundamental interest, which demographers recognize through extensive efforts to estimate, describe and interpret the age-shapes of fertility, mortality, marriage, divorce, and migration. These age-shapes are influenced by biology, culture, economic constraints and individual choice. Similarly, the shape of the economic life cycle is of fundamental interest in its own right, and this shape is influenced by the same set of factors. Here we will be primarily concerned with the estimation and description of the basic economic life cycle, and some illustrative comparisons of how it differs across countries and over time within countries in recent years.Economic behavior over the life cycle can be summarized by the amount consumed at each age and by the amount produced through labor at each age. One sort of economic dependency occurs when consumption exceeds labor earnings, a condition that marks off periods in childhood and old age. From this point of view, an older person is economically dependent even if she has accumulated claims on output that more than offset her consumption, claims that could take the form of entitlements to transfers or ownership of assets. Often the economic lifecycle is treated in a highly stylized fashion. Dependency ratios and other similar age structure variables, for example, capture only the broadest features of the economic lifecycle, and quadratic functions smooth through important details of the age patterns. Our goal here is to measure it in comprehensive detail. However, we Sources: Figures and Tables France (1996) : Author Manuscript Author ManuscriptAuthor Manuscript Author Manuscripthave not attempted to take time use into account, so such important issues as the time spent by parents caring for their children, or time spent caring for elderly relatives, are not covered here.Individual consumption or production by age are seldom calculated, because attention naturally turns toward more disaggregated measures such as wages, labor force participation rates, hours worked, or household expenditures. However, although per capita consumption and production may seem like crude measures, they summarize and incorporate the influences of many factors that may have contradictory or complementary effects on the economic life cycle.Demographic age profiles for fertility and mortality are of interest because they describe a basic aspect of human behavior. But they are also important because they can be applied to a population age distribution to calculate the number of births and deaths occurring in a period. Such a calculation requires the assumption, seldom made explicit, that variations in the population age distribution and in the age profiles of fertility and mortality, are independent. The Easterlin Hypothesis asserts the contrary: that an unusually large age group will experience unusually low fertility. Similarly, an unusually large share of young children in the population might, in some contexts, be expected to cause mortali...

Why Countries Become Wealthy: The Effects of Adult Longevity on Saving

“…We part company with Higgins by assuming that a generation length is 30 years rather than 25. This assumption is based on recent estimates of the economic lifecycle showing that a generation length of 30 years is a more realistic representation (Lee, Lee et al 2005). …”

“…Ages 30 and 60 are used to delineate the working ages (30−59) and the old ages (60+). This choice may be puzzling to some, but it is based on recent empirical estimates of the economic lifecycle in a small group of developing and industrialized countries that find that individuals do not begin to produce as much as they consume until their late twenties and that by their late fifties or early sixties they are consuming more than they are producing (Lee, Lee et al 2005). Thus, individuals are only beginning to save toward retirement in their thirties and later and are beginning to rely on accumulated wealth beginning at about age 60.…”

Demography and the statistics of lifetime economic transfers under individual stochasticity

“…These studies are based on the idea that an individual has some level of income, consumption, and deficit (the difference between income and consumption), and that, aggregated over a population, these generate transfers of resources among age classes. Studies of these transfers determine those periods in which labor income is insufficient to finance an individual's consumption (i.e., periods of dependency), and how those periods are changed by public and private transfers or asset-based reallocations, including saving and investment (e.g., Lee 1994;Lee, Lee, and Mason 2006;Lee and Mason 2011).…”

El bono demográfico en América Latina: El efecto económico de los cambios en la estructura por edad de una población

“…Esta situación produce una oportunidad única en la economía de una nación, ya que un gran contingente de personas jóvenes ingresa al sistema económico en calidad de productores, estimulando con su trabajo y sus ingresos laborales el crecimiento económico a través del aumento de la producción, ahorro e inversión; es decir, se produce una oportunidad demográfica que permite aprovechar el capital humano que dispone una sociedad para impulsar su crecimiento económico. Lee, Lee y Mason (2007) señalan que el bono demográfico es resultado de cambios de los perfiles que tiene la actividad económica por edades, los cuales se reflejan cambios de las tasas de participación laboral por edades. La evidencia existente muestra que el ingreso per cápita de un país aumenta en forma más acelerada cuando el incremento de la población en "edad trabajar es relativamente mayor que el volumen de personas dependientes (niños y adultos mayores)" (Pinto, 2011, p. 108), debido a que estos últimos son principalmente consumidores y no productores (Pinto, 2011).…”