Aging and Inter-Generational Fairness: A Canadian Analysis

Abstract

Population aging in many countries has become a fundamental concern of public policy. One reason is fears that increasing numbers of elderly will place disproportionate burdens on their children in order to fund public pensions and health-related services. This analysis first discusses basic principles for assessing this question of intergenerational fairness. It then applies an empirically-based overlapping cohort dynamic microsimulation model for a quantitative analysis of the flows of taxes and cash and in-kind transfers for successive birth cohorts. The simulations cover both exogenous factors – specifically trends in life expectancy and the strength of the economy, and policy-related factors – specifically raising the age of entitlement to public pensions from age 65 to 70, and price versus relative wage indexing. The analysis concludes, among other points, that intergenerational differences are significantly smaller than intra-generational variations, and that the parents of the baby-boom generation are likely to benefit from the largest lifetime net transfers of any birth cohort from 1890 to 2010.

Citation

Wolfson, M. and Rowe, G. (2007), "Aging and Inter-Generational Fairness: A Canadian Analysis", Lambert, P.J. (Ed.) Equity (Research on Economic Inequality, Vol. 15), Emerald Group Publishing Limited, Leeds, pp. 197-231. https://doi.org/10.1016/S1049-2585(07)15009-2