Population Age Structure, Intergenerational Transfer, and Wealth: A New Approach, with Applications to the United States

Abstract

Resources are reallocated across age and time by means of capital accumulation, credit transactions, and transfers. Each takes place through three channels: the family, financial markets, and public sector programs. These age-specific flows give rise to stocks of age-specific wealth. Weighting by population age distribution and summing yields aggregate wealth, which equals capital plus transfer wealth; the aggregate credit balance must be zero. Forms of aggregate wealth are related to properties of the macroeconomy. A framework is developed for relating flows to stocks. Flows and stocks for the United States in 1987 are analyzed by applying this framework to the 1987 CES. For example, the average household has about 100K in federal transfer wealth, a debt of 15K in state/local wealth, and a debt of 10K in interhousehold family transfers.

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