Ronald Demos Lee

• Ph.D.
• Professor at University of California, Berkeley

Expansion of the working age population has been a powerful engine of the global economy in recent decades, with the resulting demographic “tailwinds” accounting for 48% of annual economic growth from 1990–2015. These tailwinds will slow, however, with rapid global aging in upcoming decades. Building on detailed country-specific economic models and...

Macroeconomic Consequences of Population Ageing Low fertility and longer life lead to population ageing and slower or declining population growth. While slower demographic growth reduces the need for saving, the ageing population imposes old age dependency costs which are particularly heavy for the public sector. Is fertility too low? The National...

The objective of this paper is to provide new evidence about the development effects of changes in population age structure and human and physical capital. This extends our previous work by developing and employing a more comprehensive model of demographic dividends. In addition, we extend earlier analysis about the quantity-quality tradeoff using...

The attention given to Piketty (2014) has renewed interest in the level and causes of inequality. In this paper, we look at the role that population aging plays in increasing economic inequality. We provide estimates of the magnitudes of the effects on inequality of three different factors related to population aging: capital intensification, chang...

It was a different era when Gary Becker did his groundbreaking work on the economics of fertility, during the years from the late 1950 through the early 1990s. There was great concern then about the “population explosion” due to sustained high fertility in the developing world after mortality declined following World War II. In 1968, Paul Ehrlich p...

Longer lives and fertility far below the replacement level of 2.1 births per woman are leading to rapid population aging in many countries. Many observers are concerned that aging will adversely affect public finances and standards of living. Analysis of newly available National Transfer Accounts data for 40 countries shows that fertility well abov...

The US population will age rapidly for several decades and then more slowly, with less aging than most rich nations. Health of the elderly has greatly improved, but disability stagnated after 2000. Retirement age reversed its decline in the mid-1990s and health status leaves ample room for increased elder labor supply. Many older people have inadeq...

We propose new measures to summarize and compare age profiles of consumption and labor income. One measure is the lifetime support ratio or the ratio of effective lifetime labor to effective lifetime consumption. Two other measures measure the timing of work and consumption over the lifecycle. Using a highly stylized model we show how changes in th...

In developed countries, mortality decline is decelerating at younger ages and accelerating at old ages, a phenomenon we call "rotation." We expect that this rotation will also occur in developing countries as they attain high life expectancies. But the rotation is subtle and has proved difficult to handle in mortality models that include all age gr...

We explain how upward transfers from adult children to their elderly parents might evolve as an interrelated feature of a deepening intergenerational division of labor. Humans have a particularly long period of juvenile dependence requiring both food and care time provided mainly by younger and older adults. We suggest that the division of labor ev...

Much of life history theory analyzes life histories of independent, isolated individuals, who grow, forage, reproduce, and die. However, in many species social interactions such as food sharing are a key part of the life history strategy, altering the energetic budget constraint. Transfers and sharing raise reproductive success and also alter the f...

We develop a life history model with two sexes, and study the optimal energy allocation strategy of males and females. We join Darwin and others in suggesting that the origin of sexual dimorphism and sexual selection is the difference between male and female reproduction costs. Due to this assumed cost difference, the resulting Bellman equations of...

The US age pattern of economic activity is unusual among NTA economies in several ways. Consumption by older persons relative to younger ones is higher in the United States than in any other economy, but the labor income of older persons is also higher in the US than in other developed economies. It is striking that only a few decades ago, in 1960,...

Projections of population size, growth rates, and age distribution, although extending to distant horizons, shape policies today for the economy, environment, and government programs such as public pensions and health care. The projections can lead to costly policy adjustments, which in turn can cause political and economic turmoil. The United Nati...

No abstract available.

Over the next few decades population aging will begin developing in many countries and become much more challenging in high-income countries. Population aging has profound implications for the economy because of the economic life cycle, characterized by extended periods of, “dependency,” at young and old ages. The first order economic effects of po...

Theoretical and empirical results suggest that there are externalities to childbearing, but those results usually assume that these externalities accrue uniformly within a homogeneous population. We advance this argument by developing separate estimates of the fiscal externalities associated with parents—those who devote time or material resources...

Using stochastic simulations we analyze how public pension structures spread the risks arising from demographic and economic shocks across generations. We consider several actual and hypothetical sustainable PAYGO pension structures, including: (1) versions of the US Social Security system with annual adjustments of taxes or benefits to maintain fi...

Human hunter-gatherers evolved a life strategy that involved extensive sharing of food and support within and across generations, social behaviors that coevolved with the cognitive and emotional mental apparatus needed to sustain such sophisticated sociality. Adults at all ages produced surplus food which was transferred downwards to children, to s...

This article is Chapter 8 in Population aging and the generational economy: A global perspective (2011), Ronald Lee and Andrew Mason, lead authors and editors. Cheltenham, UK and Northampton, MA: Edward Elgar. Electronic access to this book is available for free here: https://www.idrc.ca/en/book/population-aging-and-generational-economy-global-per...

'Lee and Mason have done scholars and practitioners a magnificent service by undertaking this comprehensive, compelling, and supremely innovative examination of the economic consequences of changes in population age structure. The book is a bona fide crystal ball. It will be a MUST READ for the next decade!'

Abstract At each age an organism produces energy by foraging and allocates this energy among reproduction, survival, growth, and intergenerational transfers. We characterize the optimal set of allocation decisions that maximizes fitness. Time preference (the discount rate) is derived from the marginal rate of substitution between energy obtained at...

Resumen Las transferencias intergeneracionales ascendentes — de la población en edad de trabajar a la población de edad avanzada — están aumentando considerablemente en los países industrializados adelantados y son mucho mayores que en los países en desarrollo. El envejecimiento de la población es el principal factor que está provocando este cambio...

Résumé Dans les pays industrialisés développés, les flux intergénérationnels ascendants — orientés des générations actives vers les générations âgées — connaissent une hausse substantielle et sont beaucoup plus élevés que dans les pays en développement. Le vieillissement démographique constitue le principal moteur de cette évolution, si bien qu'en...

Auszug Intergenerationale Ressourcenströme nach oben — von Erwerbstätigen an Ältere — nehmen in den fortschrittlichen Industrieländern ständig zu und sind wesentlich größer als in den Entwicklungsländern. Die Alterung der Bevölkerung ist der wichtigste Faktor für diese Veränderung. Da es keine wesentliche demografische Verschiebung gibt (z.B. Rückk...

Upward intergenerational flows — from the working ages to old age — are increasing substantially in the advanced industrialized countries and are much larger than in developing countries. Population ageing is the most important factor leading to this change. Thus, in the absence of a major demographic shift (e.g. a return to high fertility), an inc...

Do low fertility and population aging lead to economic decline if couples have fewer children, but invest more in each child? By addressing this question, this article extends previous work in which the authors show that population aging leads to an increased demand for wealth that can, under some conditions, lead to increased capital per worker an...

Recent decades have seen the emergence of massive public sector transfer programmes in industrial nations. Because many transfers are age related, the population age distribution is a powerful influence on government budgets, and ageing will be very costly. We construct stochastic projections of the budgets for the federal and state/local governmen...

Public transfer programs in industrial countries are thought to benefit the elderly through pension and health care programs at the expense of the young and future generations. This intergenerational picture changes, however, if public education is also considered as a transfer program. We calculate the net present value at birth of benefits receiv...

Across the demographic transition, declining mortality followed by declining fertility produces decades of rising support ratios as child dependency falls. These improving support ratios raise per capita consumption, other things equal, but eventually deteriorate as the population ages. Population aging and the forces leading to it can produce not...

As societies industrialize, the age profile of consumption tilts strongly toward the elderly, while elder labor supply drops. Low fertility and long life lead to population aging. For millennia, material resources have, on net, flowed downward from older to younger within populations, but now in many rich societies net flows have reversed and go up...

Why do humans survive so long past reproductive age, and why does juvenile mortality decline after birth, both contrary to the classic theory of aging? Previous work has shown formally that intergenerational transfers can explain both these patterns. Here, simulations confirm those results under weaker assumptions and explore how different social a...

The economic contribution of children to their parents' households has long interested demographers because of its potential to influence fertility levels. Valuing children's labour in pre-industrial economies, however, is inherently difficult. The same is true of women's labour, a crucial component of any analysis of net production. Here we use Me...

Mortality is U-shaped with age for many species, declining from birth to sexual maturity, then rising in adulthood, sometimes with postreproductive survival. We show analytically why the optimal life history of a species with determinate growth is likely to have this shape. An organism allocates energy among somatic growth, fertility and maintenanc...

Declining morality followed by declining fertility over the demographic transition initially produce decades of rising child dependency, then decades of improving support ratios as child dependency falls (the "first dividend" which raises per capita consumption, other things equal), and finally population aging. India and ASEAN are in the first div...

Sauvy was born 31 October 1898, in Villeneuve-de-la-Raho, France. He graduated from the Ecole Polytechnique, and is known as a demographer, economist, statistician and sociologist. He was an adviser to Jean Monnet and Paul Reynaud 1938–1940, a member of the Population Commission of the United Nations from 1947 to 1974, and he occupied a chair in so...

The ‘demographic transition’ refers to the fall of fertility and mortality from initially high to subsequent low levels and accompanying changes in the population. It began around 1800 with declining mortality in Europe, and is expected to be complete worldwide by 2100. In that time the global population will have risen tenfold, the ratio of elders...

Population dynamics are the patterns of change over time in populations. Populations fluctuate in response to fluctuating external forces, or because of the internal structure of the process of demographic renewal. Damped cycles one generation long may result from the interaction of random perturbation and the age distribution of reproduction. So-c...

The Lee–Carter method for modeling and forecasting mortality has been shown to work quite well given long time series of data. Here we consider how it can be used when there are few observations at uneven intervals. Assuming that the underlying model is correct and that the mortality index follows a random walk with drift, we find the method can be...

March 13, 2003 date last saved: 03/13/03 9:41 PM date last printed: 03/13/03 8:29 AM Demographic Change, Welfare, and Intergenerational Transfers: A Global Overview Ronald Lee Demography and Economics University of California 2232 Piedmont Ave. Berkeley, CA 94720 rlee@demog.berkeley.edu This paper was prepared for Rencontres Sauvy, at Villa Mondrag...

In all societies intergenerational transfers are large and have an important influence on inequality and growth. The development of each generation of youth depends on the resources that it receives from productive members of society for health, education, and sustenance. The well-being of the elderly depends on familial support and a variety of so...

Around the world, Pay-As-You-Go (PAYGO) public pension programs face serious long-term fiscal problems due primarily to actual and projected population aging, and most appear unsustainable as currently structured. Some have proposed the replacement of such plans with systems of fully funded private or personal Defined Contribution (DC) accounts, bu...

Understanding the economic lifecycle %u2013 how it varies and why %u2013 is important in its own right, but is also critical to understanding how changes in population age structure influence many features of the macroeconomy. Economic behavior over the life cycle can be summarized by the average levels of consumption and labor earnings at each age...

How would resources be allocated among fertility, survival, and growth in an optimal life history? The budget constraint assumed by past treatments limits the energy used by each individual at each instant to what it produces at that instant. We consider under what conditions energy transfers from adults, which relax the rigid constraint by permitt...

Even over a 75-year horizon, forecasts of PAYGO pension finances are misleadingly optimistic. Infinite horizon forecasts are necessary, but are they possible? We build on earlier stochastic forecasts of the US Social Security trust fund which model key demographic and economic variables as historical time series, and use the fitted models to genera...

We imagine an optimal life history age pattern arising from the decisions of an individual who allocates energy optimally at each age among growth, fertility, and maintenance/survival. Menopause occurs, by definition, when the individual chooses a zero-energy corner-solution for fertility in her old age. Empirical evidence from various species show...

Mortality patterns and trajectories in closely related populations are likely to be similar in some respects, and differences are unlikely to increase in the long run. It should therefore be possible to improve the mortality forecasts for individual countries by taking into account the patterns in a larger group. Using the Human Mortality Database,...

Public transfer programs in industrial nations are thought to benefit the elderly through pension and health care programs at the expense of the young and future generations. However, this intergenerational picture changes if public education is also considered as a transfer program. We calculate the net present value (NPV) of benefits received min...

This paper consists of three reports on stochastic forecasting for Social Security, on infinite horizons, immigration, and structural time series models. 1) In our preferred stochastic immigration forecast, total net immigration drops from current levels down to about one million by 2020, then slowly rises to 1.2 million at the end of the century,...

Many third world countries face rapid population aging over the coming decades. The demographic trend poses two significant policy challenges – sustaining strong economic growth and establishing effective economic support systems for the elderly. This paper shows that the demographic transition presents two opportunities for more rapid economic gro...

Probabilistic population forecasts are useful because they describe uncertainty in a quantitatively useful way. One approach (that we call LT) uses historical data to estimate stochastic models (e.g., a time series model) of vital rates, and then makes forecasts. Another (we call it RS) began as a kind of randomized scenario: we consider its simple...

Some good ideas just don’t work out in practice, while other ideas that seem to be based on very questionable assumptions, surprise us by working better than one could reasonably expect. Inverse Projection (W) certainly falls in this second category. In this note, I will briefly describe the origin and early development of the idea, then discuss so...

The classic evolutionary theory of aging explains why mortality rises with age: as individuals grow older, less lifetime fertility remains, so continued survival contributes less to reproductive fitness. However, successful reproduction often involves intergenerational transfers as well as fertility. In the formal theory offered here, age-specific...

The standard measure of the 75-year Social Security imbalance is 1.87 percent of payroll, but raising taxes this much would not make finances sustainable. We consider exact and approximate infinite horizon measures based on different strategies for extending the projections past 75 years. These indicate imbalances of 3.1 to 5.7 percent of payroll....

The Tuljapurkar-Lee (henceforth \TL") model generates a large set of Monte Carlo simulations of future outcomes in the U.S. Social Security system. Four types of key macrodemographic and macroeconomic variables are modeled as stochastic components using standard time series methods. These include age-speci c mortality rates, age-speci c fertility r...

This paper revisits the literature on overlapping generations models in the demographic context of a continuous age distribution and a general age schedule of mortality. We show that most of the static results known for the 3 or N age-group models can be extended to the continuous model. Some results, previously established for economies without ca...

This paper examines the impact of declines in adult mortality on growth in an overlapping generations model. With public education and imperfect annuity markets, a decline in mortality affects growth through three channels. First, it raises the saving rate and thereby increases the rate of physical capital accumulation. Second, it reduces accidenta...

The global demographic transition began around 1800 in Europe with declining mortality followed by declining fertility, trends which spread around the world and continue in this century. At the aggregate level, population size greatly increased, growth accelerated and declined with many countries now shrinking, and age distributions inevitably move...

Under the life-cycle saving model, population aging leads to an increased demand for life-cycle wealth. Changes in transfer systems create or destroy one component of life-cycle wealth-transfer wealth. The decline in the familial transfer system in Taiwan and reform of the US Social Security system are two examples of ways that transfer wealth is r...

We present stochastic forecasts of the Social Security trust fund by modeling key demographic and economic variables as historical time series, and using the fitted models to generate computer simulations of future fund performance. We evaluate several plans for achieving long-term solvency by raising the normal retirement age (NRA), increasing tax...

Several recent efforts to improve budget forecasting techniques have emphasized the uncertainties inherent in projections of economic behavior and demography. Previous attempts to present stochastic budget projections for the U.S. have successfully incorporated sources of long-run uncertainty but have not attempted to model business cycle fluctuati...

Redistribution of resources across age has always been centrally important throughout human history, but the circumstances have changed in fundamental ways. First, the shape of the economic life cycle has changed, altering the dependent life stages. Second, the institutional context of transfers to fund these stages of dependency has changed. And t...

This report is part of a state-commissioned project undertaken after California enacted Senate Bill 910 (Vasconcellos, Statutes of 1999, Chapter 948), mandating the Secretary of Health and Human Services to develop a plan to address the impending demographic, economic, and social changes triggered by the state s aging and increasingly diverse popul...

To quantify uncertainty in forecasts of health expenditures. Stochastic time series models are estimated for historical variations in fertility, mortality, and health spending per capita in the United States, and used to generate stochastic simulations of the growth of Medicare expenditures. Individual health spending is modeled to depend on the nu...

This article examines the relationship between household demographic pressure and interage transfers for a group of Maya subsistence agriculturists in Yucatán, Mexico. The authors use data from a field study conducted in 1992-93 on individual time allocation, relative productivity by age and sex, and caloric costs of activities to estimate age sche...

The history of preindustrial Europe provides an opportunity to examine the causes and consequences of population change at a macro level. However, serious statistical problems arise from the endogeneity of all observed variables in a Malthusian system (fertility, mortality, population size, and real wages), and from unobserved influences such as sh...

Social Security projects that life expectancy at birth in 2080 will be 83.5 (average of male and female in 2002 TR). Using a trend extrapolation method that has been widely accepted by demographers (Lee-Carter), and has been used by US Census, I project it will be 85.3, or 1.8 years higher. Put differently, Social Security projects that life expect...

Population aging, accelerating as the Baby Boom generations age, will have important fiscal consequences because expenditures on social security, Medicare, and institutional Medicaid make up more than a third of the federal budget. However, the projected fiscal pressures are far in the future, and long-term projections are very unreliable. Our anal...

Population aging, accelerating as the baby boom generations age, will have important fiscal consequences because expenditures on Social Security, Medicare, and institutional Medicaid make up more than a third of the Federal budget. However, the projected fiscal pressures are far in the future, and long-term projections are very unreliable. Our anal...

Lee and Carter (LC) published a new statistical method for forecasting mortality in 1992. This paper examines its actual and hypothetical forecast errors, and compares them with Social Security forecast errors. Hypothetical historical projections suggest that LC tended to underproject gains, but by less than did Social Security. True e0 was within...

Lee and Carter (LC) published a new statistical method for forecasting mortality in 1992. This paper examines its actual and hypothetical forecast errors, and compares them with Social Security forecast errors. Hypothetical historical projections suggest that LC tended to underproject gains, but by less than did Social Security. True eo was within...

We present forecasts of the Social Security trust fund, modeling key demographic and economic variables as time series. We evaluate plans for achieving long-term solvency by raising the normal retirement age (NRA), increasing taxes, or investing some portion of the fund in the stock market. Stochastic population trajectories by age and sex are gene...

This paper examines the impacts of mortality decline on long-run growth in a dynastic family, two-sector growth model with social security. A rise in longevity has direct effects on fertility, human capital investment, and growth, as well as indirect effects through increasing unfunded social security contributions. Both the direct and indirect eff...