Index

Accumulated savings, 110Actuarial reduction, 324Acute care

defined, 129Additional Pension for Permanence

(PAP) plan, 279Administradores de Fondos de Ahorro

para el Retiro (AFORES), 124AFJP, 279

pension fund investments, 279AFP, 276Africa

working conditions, 7Aged dependency

financed, 228future, 330measure, 225ratio, 69total entrepreneurial activity

index, xiiiAge pension

Australian system, 267Ages of life, 1Age structure

forces affect, 12Mexico, 27national population, 25–31

Aging population, 1–5, 2, 8, 72burden onto retirees, 300and capital investment, 215capital returns, 220consumption

financed, 72

economic cost, xiieconomic dependency, 68–78economic growth, 156financing, 240global investment vs. global savings, 221growing dependency

prospects, 33–34health care goods and services, 129health consumption patterns, 130–135implications, 106, 370labor forces, 156and labor shortfalls, 257lived with children, 104long term care, 149Mexican population, 78pay go financing scheme, 303perception, 345population

relative size, xvproviding income security

contemporary approaches, 81–92responses

views held by EC and OECD, 339and retirement benefit levels, 192

Allocated pensionretirement vehicle, 87

Allocating future resourcesalternative options, 342

Alternative benefit paths65 year old male retiree, xiii

Alternative funding arrangementsand benefit approaches

payment of retirement benefits, xi

373

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374 Index

Alternative public policyrisks related to, 316–350

Alternative retirement systemconsumption and savings rates, 108retirement living standards, 122, 123retirement patterns, 121

Annuitizationjoint and survivor, 359

Annuityvs. lump sum payment, 332retirement vehicle, 87

Argentinabusiness procedural costs, 309evolving population structure, 29immigration rates, 20modified pension system, 278populations age ratio, 40

Asiabusiness procedural costs, 309working conditions, 7

Asia crisis1997–98, 305

Asian countries. See also specific countryfertility rates, 78

Asociacion de Fondos de Pension(AFP), 276

Asset accumulationpattern, 109

Australiaage pension system, 267baby boomers, 218birth rates

after World War II, 29capital labor ratio, 218demographic pattern

next 30 years, 77dependence on employer based

pensions, 331early retirement benefits, 244fertility rates, 29immigration rates, 20, 21importer of people, 20individual account plans, 86IT investment, 163labor force participation, 199

older females, 242labor productivity during 1990s, 162mandated savings program, 267mandatory retirement savings

program, 82occupational programs, 248

pension reforms, 267, 341populations projections, 22privately managed defined contribution

funds, 269protection from prolonged adverse labor

market, 318public pension program funding, 239retiree population, 101retirement age increasing

men and women, 245retirement income provisions, 267unemployment pensions, 261and World Bank, 268

Austriaaverage retirement ages, 291consumption growth, 299early retirement, 259

benefits, 244GDP per capita, 176health care technology, 365immigration, 213labor force

older male workers, 241participation rates, 291young adults, 204

payroll tax rates, 238retirement benefit

indexed to earnings, 297levels, 190

social insurance, 237worker delaying retirement, 247

Baby boomers, 3–4, 5, 17, 55, 218Australia, 218Canada, 29, 218Japan, 280retirement, 82, 112United States, 79, 218

Backloading, 249Basic income security

national retirement systems, 320Basic Pension

U.K. system, 89Belgium

dedicated public schemes for earlyretirement, 258–263

female labor force participation, 202foreign direct investment, 287labor productivity, 371life expectancy, 98male retirement, 97

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Index 375

men and women retirement ageincreasing, 245

population aging, 99and retirement benefit levels, 192unemployment pensions, 261

Belgium’s Silver Fund, 113Benefit reductions

forms, 320Berlusconi, Silvio, 180Beveridge, William, 44Beveridge Report

1942, 44Birth cohorts

workforce, 60Birthrates, 10, 11, 19, 22

after World War II, 29during Great Depression, 29during World War II, 29effects, 62and funded pension systems, 57Germany, 19projected, 75world population, xiii

Bludell, Richard, 255Bonds

rate of return, xiv, 64, 68Bosworth, Barry, 116Brazil

business procedural costs, 309evolving population structure, 29immigration rates, 20new business procedures, 309population estimates, 24

Britaincontributory plans, 50

Buchanan, James M., 346Burtless, Gary, 116Bush, George H., 179Bush, George W., 113Bush’s tax policy, 311

Canadaaccelerated payroll tax, 341age structure, 29baby boomers, 29, 218basic benefit, 83birth rates after World War II, 29capital income shares, 223capital labor ratio, 218consumption profiles, 166demographic pattern, 77

employer sponsored pension, 254evolving age distribution, 31evolving population distributions, 25expansion of, 237fertility rates, 29funding approach, 355GDP growth expectations, 199health care technology, 365high immigration rates, 21image, 29immigration rates, 20importer of people, 20labor force participation, 199, 242, 283labor productivity during 1990s, 162new contributory plans

after World War II, 50occupational programs, 248population

age, xi, 31projections, 22structure, 29

preretirement earnings, 318productivity improvement pattern, 181protection from prolonged adverse labor

market, 318public pension funds management, 276real returns on pension assets, 274retiree dependency projections, 64retirement age, 254retirement programs, 37savings rates, 216voting pattern, 348voting rates, 348and World Bank, 268

Canadian Pension Plan (CPP), 83contribution rates, 84

Capitalcomparative rates of return, xviivs. efficiency, 214, 219expanded, 155flowing across national borders, 314and organizational behavior, 233and production of goods and

services, 219and productivity, 225rate of return, 219

components, 222shifting

underdeveloped economies, 284supply, 215utilizing, 228–233

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376 Index

Capital based model, 36Capital deepening, 241

aging societies, 314alternative to additional labor, 214Japan, 224

Capital flowsclassified, 284

Capital for workerssubstituting, 240

Capital incomeshare of GDP, xviivs. social transfers

reliance, 105Capital investment

promote, 210Capitalism, 225Capital labor ratios, 283Capital management

effective, 231Capital owners

investing abroad, 305Capital per worker

average annual growth rates, xviiCapital reversals

supervisory and regulatoryframework, 306

Capital stockaverage growth rates, xvcapital returns, 219estimating, 219to output, xvii

Career failurecosts of insuring, 329

Caring for, 143Carter, Jimmy, 179Central America. See also specific country

development potential, 283Centralized pension asset management

of mandated retirement savings, 276Chile

demographics, 266dependence on employer based

pensions, 331disability insurance, 265evolving population structure, 29independent investment entities, 276individual account system, 86

regulatory restrictions, 278pay go retirement plans, 264pension reforms, 267rate of return and minimum

pension, 266

significant emigration, 20term life insurance, 265

Chinabusiness procedural costs, 309capital flows, 368declining dependency, 77dependency patterns, 77economic dependency on workers, 74economic position, 77evolving demographic dependency, 76foreign direct investment (FDI)

attracting, 310by International Money Fund, 310

job growth, 311juvenile and elderly dependency relative

to active workers, xiiolder population, 43opening economy, 311population, 22

retiree, 101structure, 31working age, 283

projected increases in retireedependency, 62

working conditions, 7Chirac, Jacques, 180Clinton, Bill, 179

federal budget surpluses, 360Clustering behavior model, 326Cogan, John, 272Collectivizing redistribution of income, 346Commercial Code, 308Committee on Social Protection

EC, 340Company Law

minimum deposit, 308Compensation packages

adjustments, 229Compound interest, 54Consumer goods

classification, 344Consumer loan, 110Consumption

behavioracross age spectrum, 73

changes, xviequivalence measures, 73expenditures, 187

age profile, xiigrowth, xvi

between elderly and nonelderlypopulation, xviii

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Index 377

per capita, 299for workers, 299

percentage increases, xviand retirement benefit levels, 187and savings patterns

life cycle model, 166share of output, xviyouth rates, 74

Consumption loan, 217and accumulate sufficient assets, 319model, 52, 55, 347

Contemporary retirees2005, 79

Contracting workforces, 184.See also Labor force

Contract out, 83Contributions

limited, 239rates of return, 239

Contributory pensions, 235Contributory retirement systems

workers vs. nonworking dependents, 59Coordinated salary, 89Countries. See also specific country

dependency ratios, 74dependency ratios increases, 62developed

life expectancy, 14losing population, 22

CPP, 83contribution rates, 84

Creative destruction, 225Cross border migration

Europe, 283Cross generational transfers, 329Cross national capital flows

facilitating, 368–369preconditions, 369

Cross national investing, 368Crude aged and total dependency

ratios, xivCuba

fertility rates, 78Customer capital, 230

Deathspremature, 352U.S. men

distribution, xiiiDeclining dependency

Poland, 75Deficit financing, 339

Defined contribution rate, 87Demographic aging

capital returns, 220financing, 240and labor shortfalls, 257and retirement benefit levels, 192

Demographicsand output demand, 165–171

Demographic transitioneconomic expansion, 168GDP and tax revenues, 234

Denmarkearly retirement, 258–263

programs, 262foreigners, 213health price inflation, 135labor force participation, 199

young adults, 204percentage elderly who live with

children, 104retirement age, 243retirement benefits

indexed to earnings, 297Dependency patterns

countries, 77Dependency ratios

countries, 74early retirement patterns, 60increases, 62

Developed countrieslife expectancy, 14

Developing economiesinvesting, 305potential, 7

Diamond, Peter, 113, 117Direct investment, 284

flow, 287Disability, 352

benefits, 43national social insurance system, 317

Chile, 265Finland, 261income replacement rates, 259, xviiiinsurance, 94pensions

Netherlands, 261, 262Sweden, 261, 262

programsincome replacement rates, 259increasing rates, 260work criterion, 259

social insurance, 352

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378 Index

Disability (cont.)and unemployment benefitsUnited Kingdom, 261

Disposable income, 10965 and over, xiv

Docteur, Elizabeth, 364Draw down (allocated pension)

retirement vehicle, 87

Early labor force withdrawalseliminate incentives, 257

Early retirement, 93incentives, 121

influence within private pensionplans, 255

introduction, 251supporting, 256

issuesand increasing labor supply, 290

patternsdependency ratios, 60

pensions, 94elimination, xiiigoal, 92implicit tax rates, xvii

Early survivors programssocial insurance, 352

Earningsgross replacement, xviipatterns, 235preretirement, 318

gross replacement, xviiireplacement, xi

profiles, 235and retirement benefits, 297synthetic profiles, 235

Eastern Europetotal dependency, 76working age population declining,

282EC. See European Commission (EC)Economic(s)

contributions into social insuranceprograms, 240

inactive population, 99increases, 303model, 195, 214protection, 353reduce growing fiscal pressures, 303total output, 160

Economic dependencyaging societies, 80

Economic efficiencystructured to encourage

pension system, 357Economic growth

distribution effectselderly and nonelderly, 299

improvement, 2Economic implications

age dependency versus youthdependency, 68

Economic infrastructureimprovement, 306

Economic output growthfoundation for growth, 181–185

Economic productionmathematical terms, 157

Economic prosperityconcepts, 154

Economic risksimposed by aging population, 342insuring against

during retirement period,330–338

working period, 317–330political

aging societies, 338–350Economic slowdown, 179

and retirement benefit levels, 190retirement burden levels, 185

Ecuadorpension fund investments, 273

Education systems, 5Egypt

fertility rate, 27low labor force participation rates of

women, 94pension fund investments, 274

Elderly. See Aging populationEmigration

Chile, 20growth, 20–22

Empirically based equivalence scale, 72Employee Pension Fund, 90Employee satisfaction

customer loyalty, 232Employees’ Pension Insurance

(EPI) programJapan, 90

Employees Provident FundMalaysia, 273pension fund investments, 273, 274

Employee turnover, 249

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Index 379

Employer based pension system, 82design implications, 250labor force participation, 250principles for reforming, 363third tier, 88–92United States, 91

Employment levelsUnited States, 156

Englandminimal need, 344

Entrepreneurial activity, 225and aged dependency, 225

EPF. See Employee Pension Fund;Employees Provident Fund

EPI programJapan, 90

Equitable treatmentpension reform principle, 356

EU. See European Union (EU)Europe

growth in capital stock, 158labor markets, 209rates of return on capital, 220retirement systems

pay go elements, 50European Commission (EC)

aging populationresponses, 339

Committee on Social Protection, 340estimated distribution of global output,

313objectives that encompass economic

goals, 315population shifts, 313projections of growth of GDP per capita,

176quality and sustainability, 340

European Union (EU). See also specificcountry

costs from aging dependency, 339elderly

distribution of wealth, xixFDI in, 310working age population declining, 282

Evolving national population, 22Export capital, 281

FDI. See Foreign direct investment (FDI)Federal civilian employees, 48Federal Reserve Board

estimated rates of growth in GDP, 158Feldstein, Martin, 111

Femaleslabor force participation, xvii, xviii, 4, 5,

60, 62, 201, 202, 241, 242vs. fertility rates, 5, 202increase needed, xviincreasing, 201Ireland, 291vs. males, 58

Pakistan population, 25social security benefits, 59workforce, 58

Fertility rates, 12, 56Canada, 29changes, xiiichanging, 17–19Cuba, 78declining, 78distribution, 18vs. female labor force participation rates,

5, 202and immigration, 213importance of, 25Mexico, 27Poland, 76projected, 19various, 27white women in U.S., xi

FFEChina, 310

Financial inflowsresult in, 306

Financing pensionsapproaches, 37–43

Finlanddisability, 261early retirement benefits, 244early retirement programs, 262GDP per capita, 176health care technology applications,

366IT investment, 163pipeline unemployment benefit, 262retiree income rates, 103strategy for managing rising pension

costs, 297unemployment rates, 209, 218workforce participation rates, 291

First tier benefit, 83Flat rate contributory pension, 44Floor benefit plan, 81Foreign capital owners

investment, 308

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380 Index

Foreign direct investment (FDI), 285in China

by International Money Fund, 310inflows and outflows, xviiipattern, 287upsurge, 287

Foreignersresentment, 213

Foreign funded enterprises (FFE)China, 310

Foreign investmentimpediments, 308

Foreign investorsexpectations and confidence, 287

401(k) retirement plans, 92, 127France

capital income shares, 223capital labor ratio, 217consumption growth, 299early retirement benefits, 244economic slowdown, 180fertility rates, 29filial responsibility laws, 149health care technology, 365health price inflation, 135labor force participation, 199

older female, 242older male workers, 241young adults, 204

labor movement, 370labor productivity, 371

growth, 196during 1990s, 162

life expectancy, 98minimal need, 344occupational programs, 248pattern of productivity

improvement, 181pension schemes, 245percentage elderly who live with

children, 104populations aging, 249rates of return on capital, 220strategy for managing rising pension

costs, 297unemployment rates, 209voting ages, 349workforce participation rates, 291

Free market ideology, 181Funded pension systems, 39, 45, 46, 47,

123–125, 217, 235

administrative costs low, 358affected by

birth rate, 57assets, xichanging wage rates, 66cost, 56demographic challenges, 125effectiveness, 269increasing longevity, 122interest, 67interest rate, 64vs. living longer, 121long term costs, 46vs. pay go pension system, 55, 117saving, 112shift toward, 279sufficient assets accumulated, 319worker participating

accumulated savings, xiiFund management, xviiiFund organization

classifications, 269

Gaullists’ Rally, 180GDP. See Gross domestic product (GDP)General Theory of Employment, Interest,

and Money, 165Germany

aging problems, 185automatic demographic triggers, 342birth rate projection, 75birth rates, 19capital efficiency, 223capital income shares, 223capital labor ratio, 217consumption growth, 299consumption profiles, 166early retirement benefits, 244economic slowdown, 180elasticity of substitution between capital

and labor, 221female labor force participation, 202fertility rates, 21GDP per capita, 176health services utilization, 138immigration, 210, 213importer of people, 20income earned by elderly, 104labor force participation, 199

elderly populations, 33encourage to work longer, 326

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Index 381

expansion, 207rates, 291rates for older men and women, 202sustained contractions, 160–163working age population declining, 282youth populations, 33

labor or output shortfall, 198payroll tax rates, 238pension reform, 127pension system, 221percentage elderly who live with

children, 104population

aging, 249projections, 22structure, 31

productivity, 371growth, 196improvement pattern, 181during 1990s, 162

public pension benefits, 105, 109rates of return on capital, 220retiree dependency projection, 62retirement age

changes, 325eligibility, 92increasing, 245

retirement benefitsindexed to earnings, 297levels, 190, 192

retirement programsnational, 43

savings rates, 168, 216social insurance, 43, 85, 237state pension systems, 84, 88transparent benefits, 361unemployment rates, 207

Global capital flowssupervisory and regulatory framework,

306Global economy

evolution, 371Global output distribution

estimated, xiiiGonzalez, Felipe, 180Governmental retirement programs

voting habits, 347Government bonds, 124Government mandated contributory

programs, 82Government sponsored retirement systems

Germany, 37Italy, 37

Great Britainpension benefits, 66pension system, 83

Great Depressionbirth rate during, 29

Greecefilial responsibility laws, 149

Gross domestic product (GDP), 154, 176and capital income, xviicompound annual growth, xv, xvigrowth, xvi

estimated rates by Federal ReserveBoard, 158

Ireland expectations, 199vs. Medicare costs, 143rates, xiv, xvretirement burden levels, 185and standards of living, 305

Japan, 224labor’s share, xvlevels

vs. health expenditures, 136per capita declines

New Zealand, 293for elderly and youth populations, xiv

percent of health care expenditures, xvand tax revenues

demographic transition, 234health care, 234pay go pension systems, 234

Gross replacement rateschanges, xviii

Growth ratesin real gross domestic product, xiv

Halfway technology, 144Health and Retirement Study (HRS)

U.S. National Institute on Aging, 327Health care

consumptionintensity spiral, 143–145patterns, 130–135retrospective payment structure, 145

costs, 364driving up, 135–139vs. dying, 135financing technologies, 364health care program, 241rate of growth, xv

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382 Index

Health care (cont.)defined, 129dilemma, 151expenditures

driven by advancing age, 132elderly, xvfinanced, 130vs. GDP levels, 136growth, xvpercent of GDP, xv

GDP and tax revenues, 234goods and services

and aging population, 129inflation, 135, 138and pensions

total public expenditure, xvrelated technology

cost growth, 364research and development

U.S. government spending, 146services

limiting, 148, 149technology

evolution, 145–149utilization, 367

Home careshare of population, xv

Home production, 102Hosokawa, Morihiro, 179Household income distributions, 104HRS

U.S. National Institute on Aging, 327Human Capital Index

for Europe, 232Human resource management practices

firm performance, 231research taxonomy, 231

Human resourcesorganizational effectiveness, 233

Hump shaped consumptionprofile, 167

Hungarypopulation, 22, 31, 56

Icelandlife expectancy, 98male retirement, 97pension and nonemployment benefit

environment, 263population aging, 99retirement age, 243workforce participation rates, 291

Idealist theory philosophyof political order, 346

Immigration, 12, 20, 21, 27, 56, 213effects on government budgets, 240and fertility rates, 213growth, xvii, 20–22labor force participation, 210rates, xiiiresentment, 213

Implicit tax ratesestimated, 247

Importing labor, 20, 284Improving productivity

improved living standards, 163Income distributions, 104Income security

pillars, 264India

assets, 271business procedural costs, 309job growth, 311opening economy, 311population, 22

evolving structure, 29working age contraction, 283

potential labor resources, 6working conditions, 7

Indonesiabusiness procedural costs, 309fertility rate, 27new business procedures, 309tensions resolved, 307

Information technology (IT)and regulatory practices, 163sector, 162

Insurance coveragelong term care, 149

Intellectual capital, 230Interest rates, 64–68Intergenerational concern, 350Intergenerational transfers, 36

programs, 111International capital flow

induce, 285restrictions on, 221

International Savings ComparisonProject, 166

Intertemporal retirement transfers, 330Intertemporal transfer mechanisms, 37Investment led growth, 311Investments

Japan, 313

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Index 383

Iranfertility rate, 27

Irelandcapital efficiency, 224evolving population structure, 29female labor force participation

rates, 291GDP growth expectations, 199GDP per capita, 176importer of people, 20labor force

older male workers, 241population, 22preretirement earnings, 318productivity growth during 1980s, 162public pension funds

management, 276significant emigration, 20social insurance, 237

Islamic populationstensions resolved, 307

ITand regulatory practices, 163sector, 162

Italyage distribution, 31aging problems, 185automatic demographic triggers, 342average retirement ages, 291Berlusconi government

labor strife, 370birth rates, 19

projection, 75capital income shares, 223consumption growth, 299consumption profiles, 166dependence on employer based

pensions, 331early retirement programs, 262economic dependency on workers, 74economic slowdown, 180fertility rates, 21, 31, 75filial responsibility laws, 149GDP per capita, 176health care technology applications, 366immigration, 213importer of people, 20juvenile and elderly dependency relative

to active workers, xiilabor force participation, 95, 199

female, 94, 202, 242, 291older men and women, 202, 241

shortfalls, 199sustained contractions, 160–163young adults, 204

life expectancy, 31notional basis, 88payroll tax rates, 238pension schemes, 245percentage elderly who live with

children, 104population

age structure, xideclining, 56estimates, 24evolving distributions, 25projections, 22working age, 282youth, 33youth and elderly, 33

preretirement earnings, 318growth, 196improvement pattern, 181

rapidly aging countries, 66rates of return on capital, 220retiree dependency projection, 63retirement benefit levels, 190savings rates, 216significant emigration, 20total dependency, 76unemployment rates, 209

Jackson, S.E., 231James, Estelle, 323Japan

aging problems, 185baby boom, 280birth rates, 19, 75capital deepening, 224capital efficiency, 223capital labor ratio, 217capital stock growth, 158capital stock to GDP ratio, 224consumption expenditures, 171consumption profiles, 166decline efficiency, 280economy, 178Employees’ Pension Insurance (EPI)

program, 90FDI in, 310fertility rates, 19GDP, 224GDP per capita, 176government debt, 224

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384 Index

Japan (cont.)growing dependence on capital, xviihealth care technology, 365health services utilization, 138immigration, 213income earned by elderly, 104investment strategy, 280labor force participation

rates, 291sustained contractions, 160–163working age, 283

men 65 to 74 living with spousework income, 104

nonemployment benefits, 263Osaka Bay airport, 312pension programs, 263, 370pension reforms, 127, 341population

aging implications, 168declining, 56elderly, 33projections, 22size and age distribution

effects, 178structure, 31youth, 33

pressure on policymakers, 179productivity

improvement pattern, 181during 1990s, 162

public pension funds management, 276public policy issues, 312rapidly aging countries, 66real returns on pension assets, 274retirement benefit levels, 190, 192retirement systems

pay go elements, 50return on capital, 220, 224savings rates, 216severance benefit, 90two tiers public system, 90

Job securityexcessive, 232

Johnson, Lyndonwar on poverty, 344

Keynes, John Maynard, 165Kohl, Helmut, 180Korea

female labor force participationrates, 291

health care, 135, 365pension reforms, 341

Kuwaitfertility rate, 27

Labor and capitalsubstitutability between, 215

Labor force participation, 74, 1542001, 58activity rates

levels of affluence, 300age groups

various countries, 291anticipation trends

men 60 to 64, xiiassumption

older people, 99behavior

aging societies, 314boost, 195changing, 58, 196compound annual growth, xvicontracting workforces, 184declining

ages of 50 to 54 and 55 to 59, 94older people, 5960 to 64, 95

demand2010, xviiestimate, 197projections, 197

females, xvii, xviii, 4, 5, 60, 62, 201,241

vs. fertility rates, 5, 202increase needed, xvivs. males, 58

growth rates, xivcountries, 61projected, 62

higher rates of, 303high rate countries, 207immigration, 210importing, 20, 284incentives

created by nonemployment benefits,258–263

and income replacement rates, 303increasing, xvi, 199

female, 201older people, 202young adults, 203

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Index 385

males, xviii, 184, 241, 253vs. females, 5855 to 64, xviiUnited States, xiii

mobility, 249national populations, xivolder workers withdrawing

reasons, 243productivity

growth, xviprojection, 181

for women, 182pursing higher, 290retirement age population, xivretirement benefit levels, 187, 192, 194shortfalls, 195

solving, 196shrinking, 229sources, 196stability, 249supply projections, 197utilization rates

consumption expenditures, 300withdrawals

factors affecting, 241–247working age population

productivity, 293projections, xviii

young adults, 204Labor hours

average growth rates, xvLabor market, 371

effects of occupational programs,247–258

optionsviewing, 196–206

rigiditiesreduce, 210

utilizationimprovements, 294

Latin Americabusiness procedural costs, 309dependence on employer based

pensions, 331fertility rates, 78new business procedures, 309

LDP, 179Leimer, Dean, 111Leisure

vs. material goods, 326Lesnoy, Selig, 111

Liberal Democratic Party (LDP), 179Life

estimated values, 152Life cycle model, 38–39, 52, 166, 216Life examination, 14

developed countries, 14Life expectancy, 1, 3, 12, 44, 25, 57

improvements, xiii, 16retirement burdens, 97

Lifetime switch option, 124Lives of a Cell, 143Living standards. See Standard of livingLondon Business School, 225Longer lives

and health care consumption,139–143

Long term careby age group, xiicosts

projections, xvdefined, 129demographic trends

various countries, 78insurance coverage, 149provision, 149

Looking around model, 361Lower interest rates

attract, 289Lump sum retirement benefit, 87

vs. annuity, 332, 333live on only, 334

Luxembourgdedicated public schemes for early

retirement, 258–263foreign direct investment, 287

Malaysiaassets, 271EPF, 273immigration rates, 20population

elderly growth, 40evolving structure, 29

Mandated pension savingsfunding, 270

Mandated retirement age, 330Mandated retirement benefits

purpose, 329Mandatory national pension systems

assets, 271Marginal propensity to save, 111

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386 Index

McClellan, Mark, 147McGill, Dan, 258Medicare

acute care expendituresforecasts, xv

costsrelative to GDP growth, 143

coverage, 130expenditures

from 1988 through 1995, 130United States from 1976 to 1988, 130

high cost cases, 133Meghir, Costas, 255Mexico

declining dependency, 77fertility rate, 27immigration rate, 27juvenile and elderly dependency

relative to active workers, xiilabor force participation

rates of women, 94pension fund investments, 274pension reform measure, 124–125population

aging, 31, 78elderly growth, 40evolving distributions, 25structure, xi, 27, 29working age growing, 283

retiree dependency projection, 64significant emigration, 20tequila crisis

1997–98, 305MFP (multifactor productivity), 161Middle East

working conditions, 7Mikula, Boguslaw D., 54Milevsky, Moseh A., xxiv, 274Mitchell, Olivia, 332Miyazawa, Kiichi, 180Mortality, 14Moving production offshore, 279–289Multifactor productivity, 161Multiple regression analysis, 227

NAFTA, 283Nataraj, Sita, 115National analyses

capital, labor and innovation, 229National capital flows

facilitating, 368–369preconditions, 369

National Insurance Act of 1946, 44Britain, 44, 49

National Insurance Contributions(NIC), 83

National investing, 368National Pension Programs

investing in government bonds, 273Japan, 90vs. national savings, 113–117principle for reforming, 352–362

National provident funds (NPF), 87National retirement choices

factors, 43–50National retirement systems

payment of retirement benefits, xireducing financial risks aging

populations impose, 335National Social Insurance Board of

Sweden, 54National social insurance system

disability benefits, 317assess impact of aging population,

220Netherlands

capital labor ratio, 217consumption growth, 299criterion for disability pensions, 261disability pensions, 262employer plans, 91employer sponsored pension, 88expansion of, 237GDP per capita, 176labor force participation, 95

female, 202new contributory plans

after World War II, 50pension schemes, 245population structure, 31retirement benefits

indexed to earnings, 297levels, 192

significant emigration, 20Net immigration, 12Net private capital flows, xviiiNew Zealand

birth ratesafter World War II, 29

demographic patternnext 30 years, 77

fertility rates, 29GDP per capita declines, 293mortality rate, 366

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Index 387

pension reforms, 341preretirement earnings, 318public pension program

funding, 239management, 276

unemployment pensions, 261NIC, 83Nonelderly adults, 72Nonemployment benefits

early retirement programs, 262generosity, 259

Nontechnology, 143Nordic countries. See also specific country

female labor force participation rates,291

retirement age, 243North America

accelerated payroll tax, 341dominant economies, 281

North America Free Trade Area(NAFTA), 283

Norwayearly retirement

benefits, 262dedicated public schemes,

258–263expansion of, 237foreigners, 213GDP growth expectations, 199labor force participation, 199new contributory plans

after World War II, 50payroll tax rates, 238retirement age, 243

NPF, 87

Occupational pension plansefficiency, 249requirements, 249

Occupational pension programs,247–258

OECD. See Organization for EconomicCooperation and Development(OECD)

Offshoring, 279–289, 311Old age labor force

activity rates, 243participation

effects, 244increase needed, xvi

Old Age Pension Act of 1908Britain, 43

Old age unemploymentunemployment pensions, 261

Old to young personschanging ratios, xiii

Open method of coordinationpensions, 340

Organizational effectiveness, 229Organization for Economic Cooperation

and Development (OECD)dependency ratio

multiple regression, xviiGDP per capita

growth projections, 176health care technology, 366new business procedures, 309pension assets

invested, 309population aging

economic implications, 69effects on health care costs, 133fiscal pressures, 341

preretirement earningsestimated gross replacement, 318

retirement agesmen and women, xiv

retirement periodprojection, xiv

Organization’s intellectual capital, 230Organized retirement program

funding, 38Orszag, Peter, 113, 117Output demand and labor demand

linkages, 181Output levels

estimating future, 197Outsourcing, 311

Pakistanage structure, 29declining dependency, 77fertility rate, 25importer of people, 20juvenile and elderly dependency

relative to active workers, xiipopulation

age, 31evolving distributions, 25females, 25males, 25structure, xi

ratio of elderly to youth, 33PAP plan, 279

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388 Index

Pay as you go pension system, 37, 39,40, 44, 46, 52, 122, 236, 269,319

accumulating retirement rights, 109affected by, 57changing wage rates, 66contribution rates, 84costs, 39, 56, 57, 59, 62demographic shifts, 123–125dependency ratios

contribution rates, xiivs. funded pension system, 55, 117

economic variables, 64GDP and tax revenues, 234health care program, 241hypothetical population and

operation, xiinterest, 67interest rates, 64vs. living longer, 121long term costs, 46mathematical operations, xinew contributory plans, 50other savings, 111problem, 362retirement systems, 228shift to funded system, 126, 280worker participating

accumulated savings, xiiPayroll tax, 45

collectionsbegin U.S., 47

contributions vs. benefits, 357effects, 240women’s lifetime vs. men, 51

PBGC, 92Penicillin, 16Pension. See also specific type

effectiveness, 269Pension accounting

accrual basis, 357Pension Benefit Guarantee Corporation

(PBGC), 92Pension cost

alternative rates, 271Pension Fund Administrators

(AFJP), 279pension fund investments, 279

Pension fundingvs. real funding, 123–125realities, 123–128

reserves, xviiitransition

spread across generations, 356Pension plan

administrative costs low, 358asset cumulations managed

efficiently, 358Pension programs

contributory programs, 239payroll tax rates, xvii

Pension reformsexplicit and transparent, 360timeliness, 361transparent benefits, 361

Pension saving, 355Pension structures, 106Pension surplus grows, 114Pension systems

demographic and efficiency, 56demographic challenges, 123vs. federal Social security system, 116labor supply patterns and efficiency, 57reforms

assure long term solvency, 360state governments, 116

Pension transitionsequity issues, 126–128

Pension trust funds, 114Pension wealth, xvii

loss from postponing retirement, 247Performance management system, 231Permanent income model, 166Peterson, Todd, 362Pharmaceuticals

economic justification, 147Philippines

tensions resolved, 307Physical capital

vs. productive, 155productivity

innovation, 155Plan structure

retirement and work behavior, 235–241Poland

declining dependency, 75economic dependency on workers, 74fertility rate, 76juvenile and elderly dependency

relative to active workers, xiipopulations projections, 22total dependency, 76

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Index 389

Political orderidealist theory philosophy of, 346

Political risksaddressing aging issues, 345–350

Ponzi game, 54Population. See also specific country

ages ratiosvarious countries, 43

diversity of, 351growth, 10

vs. labor supply, 22result from, 56vs. workforce, 176

growth rate, xivlevels, xiii

changes, 22size effect on consumption, 171structures, 54

underlying forces, 11Population aging, 1–5

alternative perspective, 10analysis, 2aspects, 351balance between capital and

labor, 215burden, 299consumption expenditures, 169corporate returns effects of, xviicountries losing, 22declining rate of, 11dependency ratio measure, 40distribution, xiiieconomic impact, 3effects, 244estimated retiree, xivgender and age structure, xiglobal context, 8growth in consumer demand, 171growth rate, 11health care retirement costs, 146history of, 8–11and increasing labor supply, 290other than pension problem, 351percentage economically active, xivpolitical economy risks, 338rates of return, 226and retirement benefit levels, 188

Populationist camp, 10Portfolio flows

result in, 306slowdowns, 287

Portfolio investment, 284Portugal

GDP per capita declines, 293retirement age increasing

men and women, 245retirement benefits

indexed to earnings, 297social insurance, 237

Postponing retirementimplicit tax rates, xvii

Poverty alleviationnational retirement systems, 320

PPM, 277Prefunding, 112Premature deaths, 352Premium Pension Authority (PPM),

277Preretirement earnings

gross replacement, xviiireplacement, xi

Prescription drugsregulating prices, 147

Price indexed retirement systems, 344Private and public pensions

ages, xviifor men

relative role, xvPrivate capital flows

slowdown, 285Privately sponsored retirement

programs, 37Private pension system

elements, 120Producing national output

building blocks, 156–159Production function

mathematical terms, 157Productivity. See also specific country

advancementsincrease GDP per capita, 293

compound annual growth, xviefficiency, 229growth, 154

estimates, xvlabor, xvipromotion, 303

improving, 172, 195and standard of living, 163

levels, 160–163Project on Savings and Pensions, 166Provident funds, 87

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390 Index

Public and private pensionscomplementary sizing, 105, 109structure

affected industrialized economies, 234Public expenditures

health careage profiles, xiieducation, 72

percentage of GDPfor elderly and youth populations, xiv

Publicly financed pensionsexpenditures, 69

Publicly managed pension fundinvesting in government bonds, 273investment of assets, xviii

Publicly sponsored retirementprograms, 37

Public pension programsearly retirement, 247–258retirement ages, xvii

Puerto Ricofertility rates, 78

Quasi retirement income replacementrates, xiv, 102

Recruiting excellence, 231Replacement rate, 102Research and development

attractive rewards, 367health care

U.S. government spending, 146Retire

decision, 243, 245, 247Retired population.

See also Population agingeconomic cost, 107

Retiree(s), 1average pension wealth, 245behavior changing, 100burden rate, 107growth, 299income

levels, 101–103sources, 103–106

population, 92–101estimated and projected, xivvs. men, 320projected, 100

retirement benefits2045, 80

Retirementaccumulated assets, xiiilosses in pension wealth from delaying,

247postponing

implicit tax rates, xviistandard, 94

Retirement age, 36, 92–101, 92normal

reducing benefits, 325patterns, 99raising, 324standard, 243various, 97

Retirement assetsself annuitization, 359

Retirement benefitspayment

alternative funding arrangements, xiRetirement burden levels

determining, 185–194Retirement costs

current level and anticipated growth, 98Retirement eligibility age

raising, 323Retirement income systems

designing, 102Retirement patterns, 92–101Retirement plans, 15.

See also Funded pension systems;Pay as you go pension system

change, 4characteristics, 37consumption allocation mechanism,

36–37contribution rates, xiicontribution rates required, xiidefinition, 36economic burden, 43encouraged to adopt changes, 345evolution, 35incentives

to workers to continue workingoptions, 49privately sponsored, 37public first tiers, 82–84publicly sponsored, 37public second tiers, 84–88risk, 358tax impact, 3

401(k) retirement plans, 92, 127

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Index 391

Retirement policyaligning with labor needs, 234

Retirement problemdemographic forecast, 293

Retirement saving, 354annuitization, 338vs. consumption loans, 109portion annuitized at retirement, 359

Retirement security accumulationhazards, 317

Retirement structurespillars, 264World Bank, 264

Rewards and accountability, 231Riester Pensions, 127Risks of denial

problem, 338–345Roosevelt, Franklin D., 47Russia

business procedural costs, 309and Latin American crises, 305

Samuelson, Paul, 52–55, 78, 319, 347Samuelson’s model, 52Savings

and capital investment, 215create additional, 279distribution, xviiincrease, 6motive, 355patterns and consumption

life cycle model, 166setting up, 355

Schroeder, Gerhard, 127, 180Schuler, R.S., 231Schumpeter, Joseph, 225Scotland

minimal need, 344Self annuitizing

risks, 334Settergren, Ole, 54Shakespeare, William, 1

”All the Worlds a Stage,” 372Shoven, John, 115Singapore

business procedural costs, 309Smeeding, Timothy, 336Smetters, Kent, 114Smith, Adam, 344Smith, Sarah, 255Smoking, 14

Social democratic principles, 345Social insurance, 44

adding tier of savings, 354costs increases, 241disability and early survivors programs,

352Social security. See also United States

advancing, xiiiaggregate pension saving, 120coverage to farm and domestic

workers, 47percent of persons over 65 receiving

benefits, xipercent of workers covered, xireducing benefits, xiiivarious benefits

by group, 51Social Security Amendments

1983, 48Social Security reform, 113Social transfers

vs. capital incomereliance, 105

South Africaage structure, 29elderly populations growth, 40life expectancy, 14

South America. See also specific countrydevelopment potential, 283

Southeast Asia. See also specific countrypopulations

tensions resolved, 307working age population contraction, 283

South Pacificdominant economies, 281

Soviet bloctotal dependency, 76

Spainbirth rates, 19, 75capital income shares, 223capital labor ratio, 217consumption growth, 299early retirement benefits, 244economic slowdown, 180GDP per capita, 176

declining, 293labor force participation, 199

expansion, 207female, 19, 94, 182, 202, 242, 291older men, 19, 202shortfalls, 199, 210

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392 Index

Spain (cont.)sustained contractions, 160–163young adults, 204

payroll tax rates, 238pension costs

strategy for managing, 297population

declining, 56elderly, 33projections, 22structure, 31working age declining, 282youth, 33

positive age distribution effects, 171productivity, 371rapidly aging countries, 66retiree dependency projection, 63retirement age increasing

men and women, 245significant emigration, 20unemployment rates, 209, 210

Spousal dependent benefits, 356SSI program, 83Stability and Growth Pact

EU members, 338Stagnating economies

political pressure, 179Stakeholder pension scheme, 90Standard of living, 92, 345

comparingbefore and after retirement, 101

and GDP growth, 305growth, xviii, 297image, 300improvement, 2, 11

higher workforce participation rates,300

macroeconomic policies, 290through higher productivity, 297

and labor shortfall, 195and retirement benefit levels, 186, 190,

194stimulate growth, 293

Standing by, 143Starting business indicators, xviiiState Earnings Related Pension Scheme

U.K. system, 89State level pension systems, 116State pensions

across the board reductions, 328system’s assets

invested in state’s own bonds, 272

State Second PensionU.K. system, 89

Stewart, Thomas, 230Structural capital, 230Sulfa drugs, 16Supplemental Security Income (SSI)

program, 83Supportive therapy, 143Surplus value, 226Survivor protection

annuitization, 359disability and early survivor programs,

352for juvenile dependents of working

adults, 317–330social insurance, 352

Swedenannuity vs. lump sum payment, 332automatic demographic triggers, 342benefit adjustments, 332dependence on employer based

pensions, 331disability, 261, 262early retirement programs, 262expansion of, 237funding approach, 355GDP per capita, 176immigration rates, 20importer of people, 20individual account plans, 86

reform measure, 277individual retirement savings

account, 355labor force participation, 95, 199

older female, 242young adults, 204

longevity riskstransferred, 331

mandatory contributions, 277modifications

encourage people to work longer, 326new contributory plans

after World War II, 50notional basis, 88percentage elderly who live with

children, 104population

projections, 22structure, 31

public pension funds management, 276real returns on pension assets, 274retirement benefit levels, 190, 192

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Index 393

Swedish AP funds, 113Swiss

health costs of members, 132Switzerland

early retirement benefits, 244employer plans, 91expansion of, 237foreigners, 213health care technology applications, 366immigration rates, 20labor force participation rates, 95life expectancy, 98male retirement, 97new contributory plans

after World War II, 50nonemployment benefit, 263occupational programs, 248pension benefit, 246, 263population

projections, 22structure, 31youth and elderly, 33

rapidly aging countries, 66retirement age increasing

men and women, 245retirement structure

three tier, 88Synthetic earnings profiles, 235

Taiwancapital flows, 368

Tax Qualified Pension Plans (TQPP),90–91

TEA Index, 225aged dependency, xiii

Technology, 144substitute for labor supply growth, 225

Thailandbusiness procedural costs, 309

Theoretical life cycle model, 37Thomas, Lewis, 143Thomas’s classification system, 143Thompson, Lawrence, 107, 121Thompson’s model

first ratios, 108second ration, 121third ratio, 122, 123

TMR, 166Tobin, James, 226Tobin’s Q, 226–228Total consumption

changes, xvi

expendituresage profile, xiiand retirement benefit levels, 187

percentage increases, xviTotal dependency

vs. aged dependency, 69China, 76, 77ratio, 69, 72United States, 77

Total Entrepreneurial Activity (TEA)Index, 225

aged dependency, xiiiTQPP, 90–91Training and Mobility of Researchers

(TMR), 166Trust fund

vs. deficit, 114–117Turkey

fertility rate, 27

UDF, 180Unemployment benefits, 94, 259

and disabilityincome replacement rates, xviii, 259

entitlement conditions, 261Unemployment rates, xvii, 207Unhealthy habits, 14Union for French Democracy (UDF), 180United Kingdom

Basic Pension system, 89benefit plans, 267capital efficiency, 223capital income shares, 223consumption profiles, 166contract out system, 90disability, 261early retirement, 255employer based pensions

dependence on, 331employer pensions, 89, 254fertility rates, 29GDP growth expectations, 199GDP per capita, 176health care technology, 365importer of people, 20labor force participation, 199

female, 184older female, 242older male workers, 241young adults, 204

life expectancy, 98male retirement, 97

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394 Index

United Kingdom (cont.)occupational programs, 248pay go pensions, 50pension costs

strategy for managing, 297pension systems, 83, 246percentage elderly who live with

children, 104population

retiree, 101privately managed defined contribution

funds, 269productivity

growth, 196improvement, 181during 1990s, 162

protection fromprolonged adverse labor market, 318

retiree income rates, 103retirement age, 255savings rates, 168, 216significant emigration, 201940s pension policy, 44stagnating incomes, 330unemployment pensions, 261voting pattern, 348voting rates, 348and World Bank, 268

United Nationscapital utilized efficiently, 6demographic profiles

populations various country, 70United Nations Population Division

population composition estimate, 74United States

baby boomers, 79, 218birth rates

after World War II, 29capital efficiency, 223capital income shares, 223capital labor ratio, 218censuses, 8consumption patterns, 73consumption profiles, 166deficits, 272early retirement

benefits, 244incentives, 250

economic position, 77elderly

distribution of wealth, xix

employer based pensionregulatory and operating

environment, 363employer based pensions, 91

dependence on, 331employer sponsored pension, 253employment levels, 156evolving demographic dependency, 76expansion of, 237FDI in, 310fertility rates, 29

white women, xi, 19funds invested directly

in other economies, 314GDP per capita, 176GDP per capita declines, 293government trust funds, 115health care system deficits, 351health care technology, 365health delivery system

assessment, 365hybrid pension structures, 258immigration rates, 20, 21importer of people, 20IT investment, 163juvenile and elderly dependency

relative to active workers, xiilabor force participation, 95, 192

by age and sex, xiifemales, 62, 184, 202incentives to work longer, 326older female, 242size and productivity, 163young adults, 204

labor markets, 209male

death distribution, xiiiMedicare spending

forecasts, xvmortality rates

men vs. women, 333national savings, 113–117nonemployment benefit, 263occupational programs, 248pension assets

real returns, 274pension benefit, 246, 263percentage elderly who live with

children, 104population

elderly, 33

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Index 395

and output measures, xvprojections, 22working age growing, 283youth, 33

private pension systemobligations, 120

productivity, 163growth, 196improvement pattern, 181and output measures, xvduring 1990s, 162

protection fromprolonged adverse labor market, 318

retiree population, 101retirement age changes, 325retirement age increasing

men and women, 245retirement benefit levels, 190, 192retirement patterns, 326retirement systems, 37

pay go elements, 50savings rates, 168, 216shift among employer sponsored

pensions, 335Social Security, xiv, 44

age availability, 252benefits, 324cash flow, xvfederal budget surpluses, 360implementation, 44personal saving, 111reform, 113trust fund, 115trust fund balance, 119underfunding, 341

for baby boomers, 79state pension accumulations, 272trust fund

accumulation, 113–117voting pattern, 348voting rates, 348war on poverty, 344wealth distribution, 328welfare safety net, 83

United States Marshall Plan, 218United States Medicare program

age, longer lives, and utilization, 141Universal pensions, 82Utilization

and health costs, 138limiting, 148

Utilizing human capitalaging societies, 314

Variability of income, 346Virtual accounts

defined contribution plans, 87Visco, Ignazio, 341Visible poverty, 44Von Bismarck, Otto, 43, 92Voters

estimated shareover ages 50 and 60, xix

and younger population, 348Voting ages

France, 349Voting patterns

Canada, 348governmental retirement programs, 347United Kingdom, 348United States, 348

Voting ratesUnited Kingdom, 348United States, 348

Wage growth, 64–68Wage structure, 55Watson Wyatt Human Capital Index, 231Wealth

classes, 327definition, 328distribution, 328

implications, 328Western Europe. See also specific country

dominant economies, 281pension reforms, 341

Wicksell, Knut, 346Widows, Orphans, and Old Age

Contributory Pensions Act, 44Willetts, David, 343Willmore, Larry, 353Worker productivity

determined, 172Workers

alternative to finding, 214effects on government budgets, 240

Workers myopiainsuring against, 329

Workers notional accounts, 87Workers to beneficiaries

ratio, 303Workforce. See Labor force participation

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396 Index

Workplacecollegial and flexible, 231

Work related incomeelderly, 104

World Bank, 306advocated pension reforms, 268aging population, 24Averting Old Age Crisis, 80and borrowing from pension funds, 273capital utilized efficiently, 6pension funding, 268pension systems, 80regulations entrepreneur, 308starting business, 308

World Bank Policy Research Report, 289World population

births, years lived, xiii

World War IIbirth rate during, 29

Wyatt, Watson, 232

Young adultsin school, xvii

Younger workers labor force participationrates

increase needed, xviYouth

consumption, 72defined, 72dependency ratio, 69and elderly dependency, 77

Zero pillar, 328and World Bank, 268

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