Short introduction (aim, goal of project, when did this project start?)
The WELTRANSIM project, starting in January 2017, aims to explain how the ageing process affects the transfers of resources between age groups and also between people of the same generation. Population ageing implies more pressure to social security systems, more need for long-term care and, in general, a change in the care systems of the different countries. Depending on how people are secured by different policies of the welfare state, this effects will impact differently to the rest of the society (family policies, long-term care policies…). The role of family transfers (both in money and time) will be also crucial to understand how societies react to the population ageing process. The ageing process, together with policy intervention of different welfare states, can lead to different sources of inequalities: between age groups (there is currently a shift of public resources to older people in the majority of the OECD countries), and also within generations (between families with and without children, for example). The direction and magnitude of such inequalities will depend, for example, on the pension system structure: “pay as you go” systems are a direct system to transfer resources form working age population to older population, and have also implications in terms of intragenerational equity (families financing, with private transfers, children who will be the future working age population). Another source of inequality emerge between education groups: it is well known that the more educated live longer and in a better economic position. So, the “benefits” of increasing life expectancy does not distributes equally between education groups, and probably won´t be the costs.
Another central objective of the project relies on investigating political aspects related to the ageing process, particularly the so-called “generational conflict”. The intuition behind this hypothesis is simple: the old population has probably different preferences in comparison with the younger population and therefore they demand different allocations of public resources. In a framework of a representative democracy and population ageing, this means that policies are shaped by the desires of the older people
The National Transfer Account project (http://www.ntaccounts.org/web/nta/show/) provide an accounting of economic flows across age groups in a given year. Microsimulation models (both static, as EUROMOD, and dynamic) will be also employed. This kind of models have been widely used by policy agencies to assess different issues related to demographic changes and policy intervention effects.
What kind of impact on the society is expected?
The general objective of this project is to provide empirical data together with a comprehensive and comparative analysis, materialized in a simulation tool, to provide policymakers with informed choices about the joint effect of the welfare state programmes geared toward different age groups, such as family policies, retirement and long-term policies. This will allow an improvement of the comprehension of the overall effect of policies on welfare over the life cycle. The theoretic basis is the taxonomy of welfare models, which serves as a reference to compare specific representative policies. The utilization of microsimulation tools in the WELTRANSIM project can contribute to clarifying how welfare state regimes influence most of these dimensions: mortality differentials in general, and particularly between education groups; study durations and labour market entry; access to education, education finance, labour market participation (different degree of dependence on labour) – probably most relevant for women/mothers/parents; risks and consequences of unemployment (including on pensions and old-age income); earnings and income profiles due to progressivity and levels of taxes and benefits; concentration of reproduction: reconciliation of family and work, e.g. high childlessness in conservative welfare state due to specialization; pension income: preserving public status (conservative), public common equal standards (social democrat), private saving with some minimum provision (liberal)
The policy intervention in the above-mentioned dimensions, together with the demographic transition, creates different patterns of intergenerational transfers. This has implications in terms of intergenerational equity that can also be subject to policy intervention. That is why the comparative macro perspective provided by the NTA analysis can be useful for policy-making and society to identify sources of undesired (unfair) inequalities.
As instruments of applied economics microsimulation models have a wide range of stakeholders, including academia, government agencies, think tanks, international organizations (like OECD, World Bank), political parties and media. This is currently mostly the case for static tax-benefit models like Euromod (or more detailed national models) available in most developed countries, as such models allow to identify winners and losers of reforms as well as implications on revenues. While static models are meanwhile standard and widely used instruments, this project can serve the same broad range of stakeholders adding a longitudinal perspective to policies, and a better understanding how systems redistribute between ages, cohorts, and generations and how they interact with demographic change and population ageing.
Which phase of your project are you at the moment?
The design of the microsimulation model is almost completed and some of the modules of the model have been developed.
In order to make accessible the development of the model to all the partners now (via intranet) and to the community at end of the project, a web has been set up in a new domain purchased to that effect (see a brief sketch in the appendix).
On the other hand, SHARE data have been explored to obtain information on time and money transfers to/from people older than 50.
Did you already get any preliminary results?
The project is still in the development phase collecting data and setting up the model (see point 3).
Could you summarize these results?
The main result in this step of the project is the development of the microsimulation model (MicroWELT): the structure of the model is already designed and several modules have been tested (starting population, mortality by education, fertility, education progression). WELTRANSIM project emphasizes the integration of dynamic microsimulation with static approaches, namely National Transfer Accounts (NTA), and static microsimulation. This approach supports model validation and calibration for specific years as well as future refinements. National Transfer Accounts break down social transfers by age groups. Also feeding into the microsimulation are the result of a study on typical demographic patterns associated with the welfare state regimes like distribution of family sizes and childlessness by education. MicroWELT is a competing risk continuous time model with interacting agents. While it aims at producing realistic life-courses and distributions, the aggregate outcomes of most processes can be aligned to external projections (e.g. the demographic and economic projections of the EC Ageing Report).
Are the results in line with your a priori expectation?
There are no incidences by the moment. The data needed have been obtained and the microsimulation model is almost completely designed and some modules programmed and tested.
Did your project receive some external feedback (from possible stakeholder, national journals, etc…)?
A first version of the microsimulation model (the microWELTmodel) employed in WELTRANSIM project to compare welfare transfers in the context of demographic change in four welfare state regimes was presented during the 6th World Congress of the International Microsimulation Association, 21-23/06/2017 Torino, Italy (http://www.microsimulation.org/conferences-and-workshops/6th-world-congress-of-ima/).
Some advances in the investigation of the relationship between ageing and policy issues have been done. A draft paper on the effects of ageing on education have been presented in the Encuentro de Economía Pública in Spain (http://www.economiapublicatoledo.com/). This research provides the starting point to our investigation that seeks to model the determinants of fertility considering that fertility is also affected by family policies (and particularly public education expenditure) and family norms.
What are the phases planned for the immediate future?
The first policy brief is expected to be published after the first year of the project. At this time, the first results of the microsimulation model will be available simulating life-cycle income by educational level and cohort for UK, Austria Finland and Spain. These results will provide the first intuition on how education, intergenerational transfers and policies interact with ageing and influence lifecycle risks and, consequently, wellbeing in the elderly. More concretely, the model will test to what extent individuals with lower education levels, lower income or occupational status, have lower chances of survival and higher morbidity rates than individuals with higher socioeconomic status and the possible differences by welfare state models.
After that (month 24) inequality indicators will be calculated. The models of fertility and its interaction with dependency ratios are expected to produce the first results after the month 18th. After that, we will be able to explain differences by country in the determinants of fertility. The elaboration of National Transfer Account (NTA) Data by family type and the analysis of family transfers by country are expected to be finished after the month 30. Finally, at the end of the project, we will be able to compare the resulting NTA-family profiles by country and relating such differences to relevant family policies, fertility rates and women participation policies and rates.