Comparing generations using NTA: Insights from French age profiles

Comparing generations using NTA: Insights from French age profiles 1979-2011 Hippolyte d Albis, Université Paris 1 Panthéon-Sorbonne, Paris School of Economics Carole Bonnet, INED Julien Navaux, Université Paris Dauphine, Paris School of Economics Jacques Pelletan, Université Paris 8 François-Charles Wolff, Université de Nantes Global NTA Workshop, June 21 24, 2016, Saly, Senegal

Motivation Debate about intergenerational equity in France: Chauvel (1998), Chauvel et Schröder (2014): A clash between generations, benefiting to baby-boomer Baby Boomers: Good economic position Accumulate a lot of wealth Monopolize public transfers Young generations: Debt of previous generations Difficulties for the integration on the labor market Insufficient access to housing

Motivation Debate about intergenerational equity in France: Chauvel (1998), Chauvel et Schröder (2014): A clash between generations, benefiting to baby-boomer VS Piketty et al. (2011), Allègre (2011): No clash between generations Inequalities are more important within generations rather than between generations Growth benefits to every generation

Motivation Issue: Do Baby-boomers benefit from intergenerational inequities in France? Inputs: NTA in France : 1979-2011 LCD, transfers & reallocations completed

Outline Intergenerational equity indicators Results: 1. Lifecycle Deficit 2. Asset Based Reallocations 3. Public Transfers

Intergenerational equity indicators 3 most common indicators (Blanchet, 1998, 2010 ; Bonnet, 2014) Indicator 1: Compare age groups Indicator 2: Compare the standard of living of several generations at the same age Indicator 3: Compare the balance sheet of several generations over the entire life cycle

Intergenerational equity indicators Choose a criterion for each indicator Indicator 1: Compare age groups Criterion: Stability of the relative situation of each age group Indicator 2: Compare the standard of living of several generations at the same age Criterion: Each generation improves its position with respect to the previous generation at the same age

Outline Intergenerational equity indicators Results: 1. Lifecycle Deficit 2. Asset Based Reallocations 3. Public Transfers

Constant thousand euros Lifecycle Deficit: Consumption 30 Per capita age profiles - France 1979-2011 25 20 15 10 5 0 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 Age 1979 1989 2000 2011

Constant thousand euros Lifecycle Deficit: Consumption 30 Per capita cohorts - France 1979-2011 25 C 1990 C 1980 20 15 C 2000 C1960 C 1950 C 1940 C 1930 C 1920 C 1910 C 1900 10 C 1970 5 0 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 Age

Constant thousand euros Lifecycle Deficit: Labor income 45 Per capita age profiles - France 1979-2011 40 35 30 25 20 15 10 5 0 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 Age 1979 1989 2000 2011

Constant thousand euros Lifecycle Deficit: Labor income 45 Per capita cohorts - France 1979-2011 40 C 1970 C 1960 35 30 C 1980 C 1940 C 1950 25 20 15 C 1930 10 C 1920 5 0 C 1910 C 1900 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 Age

Outline Intergenerational equity indicators Results: 1. Lifecycle Deficit 2. Asset Based Reallocations 3. Public Transfers

Asset Based Reallocations Focus on households Focus on inflows: Private property income: financial assets + real assets Private capital income: owner occupied housing

Constant thousand euros Asset Based Reallocations: Private property income inflows 30 Per capita age profiles - France 1979-2011 25 20 15 10 5 0 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 Age 1979 1989 2000 2011

Constant thousand euros Asset Based Reallocations: Private property income inflows 45 Per capita cohorts - France 1979-2011 40 C 1940 35 30 C 1950 25 20 C 1960 15 10 5 C 1970 C 1930 C 1920 C 1910 C1900 0 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 Age

Constant thousand euros Asset Based Reallocations: Owner occupied housing Per capita profiles - France 1979-2011 3,5 3 2,5 2 1,5 1 0,5 0 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 Age 1979 1989 2000 2011

Constant thousand euros Asset Based Reallocations: Owner occupied housing 3,5 Per capita cohorts - France 1979-2011 3 C 1960 2,5 C 1970 2 1,5 C 1980 1 C 1940 C 1930 C 1920 C1910 0,5 C 1950 C 1900 0 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 Age

Outline Intergenerational equity indicators Results: 1. Lifecycle Deficit 2. Asset Based Reallocations 3. Public Transfers

1979 1984 1989 1995 2000 2005 2011 Ratio Public transfer outflows Ratios of public transfers outflows 60+/25-59, 0-24/25-59 and 40-59/25-39 Per capita - France 1979-2011 1,40 1,20 1,17 1,21 1,20 1,15 1,08 1,00 0,98 0,99 0,80 0,60 0,40 0,47 0,42 0,41 0,48 0,51 0,52 0,52 0,20 0,22 0,21 0,20 0,17 0,17 0,17 0,16 0,00 Year 60+/25-59 0-24/25-59 40-59/25-39

thousand Public transfer outflows 30 25 Age profiles of public transfer outflows in 2011 - per capita other taxes Inheritance tax Payroll tax 20 VAT Corporation tax (IS) movable assets 15 Employer contributions Tobacco Petroleum Products (TIPP) 10 Value added tax (VAT) 5 0 social contributions CSG IRPP 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 Age Employer contributions social contributions Housing tax and property tax CSG CRDS & Income tax (IRPP)

thousand Public transfer inflows 35 30 25 Age profiles of public transfer inflows in 2011 - per capita Other cash transfers Professional insertion ATMP Pensions Scholarships 20 Family benefits Pensions Disabled (AAH) Solidarity (RMI, RSA) Unemployment benefits 15 Family benefits Other in-kind transfers 10 Housing Assistance (APL) APA Elders 5 Education Other in-kind transfers Health Long term care (APA) Health 0 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 Age Education

Constant thousand euros Public transfer inflows 40 Per capita cohorts - France 1979-2011 35 30 25 C 1940 C 1930 20 C 1950 15 C 1990 C 1910 C 1900 10 C 1980 C 1970 C 1960 C 1920 5 0 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 Age Source: d Albis & Navaux, 2016

Constant thousand euros Public transfer inflows 40 Per capita cohorts - France 1979-2011 35 30 25 Early retirement: + for C 1940 C 1940 C 1930 20 C 1950 15 C 1990 C 1910 C 1900 10 C 1980 C 1970 C 1960 C 1920 5 0 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 Age Source: d Albis & Navaux, 2016

1979 1984 1989 1995 2000 2005 2011 Ratio Public transfer inflows 4,0 3,5 3,0 3,2 Ratios of public transfers inflows 60+/25-59 and 0-24/25-59 Per capita - France 1979-2011 2,9 3,1 3,2 3,3 3,2 3,1 2,5 2,0 1,5 1,4 1,3 1,3 1,4 1,5 1,4 1,3 60+/25-59 0-24/25-59 1,0 0,5 0,0 Year Source: d Albis & Navaux, 2016

Public transfer inflows Since 1940 in the United States, the ratio of expenditures per child under age 22 to expenditures per adult age 65 or over has hardly changed. By contrast, the popular view of generation fighting-that public expenditures on the elderly grew rapidly because the old became politically powerful as they became more numerous-cannot explain why expenditures on children grew just as rapidly. Gary Becker (1988)