“Based on 2005 estimates of National Transfer Accounts for South Africa, this paper investigates the resource flows across ages within the generational economy. The paper provides estimates of the lifecycle deficit and describes the financing of the deficit. The final section of the paper discusses the first and second demographic dividends and looks at potential policy options that would help the country maximise the benefit that arises through the demographic transition. This paper uses the National Transfer Accounts (NTA) methodology to analyse the demographic dividend that will arise as the South African population ages. The NTA methodology focuses on what is referred to as the generational economy, defined as: (1) the social institutions and economic mechanisms used by each generation or age group to produce, consume, share, and save resources; (2) the economic flows across generations or age groups that characterize the generational economy; (3) explicit and implicit contracts that govern intergenerational flows; (4) the inter-generational distribution of income or consumption that results from the foregoing.
There are four activities that are central to the generational economy, namely working, consuming, sharing and saving. Consumption occurs throughout the lifecycle, although the level varies by age. Working, however, does not occur across all ages, particularly amongst the very young and the very old. As a result, the young and old are typically unable to finance their consumption on their own. Sharing and saving, then, represent the only means through which the young and old are able to bridge this gap.”
