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Two NTA indicators we are thinking about using in the
wall chart for Latin America and the Caribbean
Tim MillerNTA Working Group on Indicators
June 8, 2010Honolulu, Hawaii
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First Indicator:Intergenerational Tax Rate
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Question:
• How large a tax would be needed to finance these periods of dependency?
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Answer:
The Intergenerational Tax Rate=
Aggregate LCD for Youth and Elderly / GDP
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The artist formerly known as Prince
Why is this indicator called the Intergenerational Tax Rate? Why not call it by its proper definition, the Aggregate Life Cycle Deficit of Youth and Elderly divided by GDP?
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Second Indicator:Benefit Generosity Rate
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Question:
• What is the annual cost of educating the average child? in Brazil? in the United States? in Burkino Faso?
• How does the average cost of educating a child compare to the average costs of providing financial support to elderly?
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Answer:
The Benefit Generosity Ratio=
Average Education, Health, or Pension Benefit
as a share of GDP/working-age adult
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Expenditures/GDP can be expressed as product of demography and policy.
DEMOGRAPHIC DEPENDENCY RATIO FOR EDUCATION, HEALTH, AND PENSIONS
Population at-risk(e.g., school-age population)
÷Working-age Population
BENEFIT GENEROSITY RATIO FOR
EDUCATION, HEALTH, AND PENSIONS
Benefits per person÷
GDP per working-age person
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B/GDP = bgr * P(6-21)/P(20-64) • B = Aggregate educational expenditures.• bgr = average benefit per school-age person
relative to economic output per working-age adult = B/P(6-21) / GDP/P(20-64).
• P(6-21) = School-age population (ages 6 to 21).
• P(20-64) = Working-age population.
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Two nice features
• International comparisons of 3 programs: education, health, and pensions.
• Good for projections: we can project the demography easily and can tell interesting stories about policy through the BGRs.
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THE ELDERLY POPULATION AND PUBLIC PENSION SPENDING PER OLDER ADULT
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Mahalo