Full Generational Accounts: What Do We Give to the Next Generation?

Ronald Lee, University of California, Berkeley
Joze Sambt, University of Ljubljana

Do we make large transfers to our children, or are we saddling them with debt and obligating them to support us in our old age? Here we describe a method for answering this question at the national level. Standard Generational Accounting (GA) calculates the net present value of survival-weighted public sector taxes and benefits. Full Generational Accounts (FGA) adds to this the Present Value of private transfers expected to be received over a lifetime, including parental costs of childrearing, bequests, and inter vivos transfers received as adults. In this formulation, we count the private transfers received, but do not net out those made to others, because the latter are discretionary, unlike taxes. Using NTA data we calculate a first approximation to FGA for a number of high income countries. We also decompose the FGA into public and private components, and into human capital investments (health, education), bequests, and other consumption.