Reflections: Pitfalls and Possibilities A View from the South

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Reflections Pitfalls and PossibilitiesA View
from the South
Cassio M. Turra Princeton University
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Why should we be enthusiastic?

• Impact of first results in 2000.
• Historical data can elucidate determinants of
  intergenerational transfers.
• Lees model has evolved golden-rule and
  steady-state assumptions have been relaxed.
  Integration with Masons saving model.
• More emphasis on the role played by familial
  transfers 70 of municipalities in Brazil have
  higher income from SS than FPM.

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Reflecting on Latin Americas Economy

• Effects of Inflation
• Transfer Role Inflation Tax
• 3.5 of GDP in 1987 (Brazil)
• We dont know the age profile of holders of
  currency
• Transfer Role Partial indexation of the
  economy.
• Retirement Benefits may have lost real value
  during the 1980s.
• Credit Role Money supply

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Inflation Tax in Brazil (Simonsen and Cysne 1989)
Year Inflation IT/GDP
1977 38.8 1.70
1978 40.8 1.79
1979 77.2 2.82
1980 110.2 3.04
1981 95.2 2.25
1982 99.7 2.20
1983 211.0 2.97
1984 223.8 2.23
1985 235.1 2.11
1986 65.0 1.17
1987 415.8 3.53
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Reflecting on Latin Americas Economy

• Future Trends
• Determinants of Interest Rate
• Is the rate endogenous in the model?
• How sensitive are the results to changes in the
  rate used in the model?
• Determinants of Growth Rate
• Is the rate endogenous in the model?
• Whats the role played by public expenditures
  with education and health in promoting economic
  growth?

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Possibilities Intergenerational Transfers and
Poverty

• Bravos suggestion last meeting PB in Brazil
• Intergenerational equity concept loses
  importance in face of persistent inequality and
  current poverty rates in Latin America.
• Historical data and future trends can cast light
  on the dynamics of inequality in Latin America
• Discussion on public policy changes and
  intergenerational transfers cant be divorced
  from debate on poverty.

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Age, Poverty Rates and Public Transfers in Brazil
(Paes de Barros and Carvalho 2003)
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Possibilities Inter and Intra-generational
Transfers

• How valid is the concept of average individual
  in a heterogeneous country?
• Life cycle trajectories and demographic changes
  may vary substantially among population
  subgroups.
• Example1 Differences between pay-as-you-go
  systems for private workers and civil servants.
• Example 2 Informal economy.