Private versus Public Transfers During a Demographic Transition

Abstract

Intergenerational transfers, be they mediated by the government or the fam­ily, are to a great extent contingent on the age structure of the underlying population. In most western countries this age structure, owing to a decline in fertility and mortality, will change dramatically in the coming decades, and so will both public and private intergenerational transfers. It thus follows from pure logic that the size of flows will be affected as the relative number of transfer recipients and donors changes. For example, in face of population aging a pay-as-you-go pension system can guarantee constant pensions or constant contributions, but the constancy of both magnitudes is impracti­cal. In the same manner it is possible that the overall resources bequeathed by parents to all of their children stay constant, or that the inheritanceper capitareceived by each offspring remains unchanged. But it is not possible for both of these magnitudes to remain constant (cf. [102]). In the case of public intergenerational transfers the specific design of fiscal policy determines in which way transfers adjust and, as a consequence, benefits or burdens are spread among recipients and donors. In the case of private intergenerational transfers adjustment and distributive consequences hinge on the underlying transfer motives.