Fanny A. Kluge

The advantages of demographic change after the wave: fewer and older, but healthier, greener, and more productive?

Population aging is an inevitable global demographic process. Most of the literature on the consequences of demographic change focuses on the economic and societal challenges that we will face as people live longer and have fewer children. In this paper, we (a) briefly describe key trends and projections of the magnitude and speed of population aging; (b) discuss the economic, social, and environmental consequences of population aging; and (c) investigate some of the opportunities that aging societies create. We use Germany as a case study. However, the general insights that we obtain can be generalized to other developed countries. We argue that there may be positive unintended side effects of population aging that can be leveraged to address pressing environmental problems and issues of gender inequality and intergenerational ties.

The Fiscal Impact of Population Aging in Germany

Previous studies have shown that population aging has severe consequences for public spending. However, in welfare states with a federal budget structure, population aging will affect the levels of government to differing degrees. This article focuses on the impact of population aging on the fiscal system of the Federal Republic of Germany. The analysis draws upon profiles for public transfer flows by single years of age to illustrate the impact of age structure changes on the cost and revenue structures at the different levels of government. The results show that Länder and local governments are likely to achieve cost reductions while the federal budget and social security will face higher expenditures because of the increasing number of elderly people. This study provides valuable information on the age utilization of public flows and on the need for restructuring the allocation rules for government revenues and expenditures across levels of government.

Linking Income, Transfers, and Social Support in an Agent-Based Family Exchange Model

The positive relationship between income and old-age survival is well established. It is, however, less clear whether wealthier individuals live longer because they can afford certain goods and services not available to people with lower incomes, or because of indirect factors. This project investigates the role of intergenerational exchange in the relationship between income and mortality. In the previous literature on the link between income and longevity, this factor has seldom been analysed. We develop an agent-based model to examine the exchange relationship in a two-generational family. In the model, older parents use increases in their pension income as intergenerational transfers to younger family members, and receive emotional or functional support in return. Taking advantage of the natural experiment of the German reunification, we estimate our model using realistic demographic, economic, and time use data. Our results imply that intra-familial resource exchange is beneficial for both the health of older parents and the living conditions of adult children in times of economic uncertainty. The findings therefore suggest that increases in pension income may affect old-age survival, both directly through the amenities elderly people can buy with the additional income, and indirectly through intergenerational transfers that incentivise adult children to provide support to their parents.

Care for Money? Mortality Improvements, Increasing Intergenerational Transfers, and Time Devoted to the Elderly

Background: After the reunification of Germany, mortality among older eastern Germans converged quickly with western German levels. Simultaneously, the pension benefits of eastern Germans rose tenfold. Objective: We make use of German reunification as a natural experiment to show that, first, increasing financial transfers from the elderly to their children led to increasing reverse transfers in the form of care; and, second, this rise in the number of hours spent on care led to a reduction in old-age mortality. Method: As a first step, we calculated intergenerational transfer profiles by age for eastern and western Germany to determine whether any changes in downward and in upward transfers in the form of time and money occurred since reunification. We use generalized linear regression to test whether rising pensions led to an increase in the number of hours spent on care, and whether this increase led to a reduction in old-age mortality. We use different macro level data sources to test our hypothesis, including mortality rates and time use surveys for East and West Germany and information on private intergenerational transfers from the National Transfer Accounts project for Germany. Results: We show that since German reunification, intergenerational downward transfers more than doubled in percentage terms in the east. This was predominantly caused by the sharp increase in pension benefits since the fall of the Berlin Wall. At the same time, mortality among pensioners dropped markedly, and converged to western German levels. We further show that the rise in pension income was strongly correlated with the increase in social support and the decline in mortality among older eastern Germans. Discussion: Our result suggest that there was an interfamilial monetary transfer from the elderly to the young in exchange for social support. This mutual beneficial exchange may have helped to improve the survival of older East Germans after the reunification.