Growing Old in an Older Brazil

DIRECTIONS IN DEVELOPMENT
Human Development
Growing Old in an Older Brazil
Implications of Population Aging on Growth,
Poverty, Public Finance, and Service Delivery
Michele Gragnolati, Ole Hagen Jorgensen, Romera Rocha, Anna FrutteroGrowing Old in an Older BrazilGrowing Old in an
Older Brazil
Implications of Population Ageing on Growth,
Poverty, Public Finance, and Service Delivery
Michele Gragnolati
Ole Hagen Jorgensen
Romero Rocha
Anna Fruttero© 2011 The International Bank for Reconstruction and Development / The World Bank
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ISBN: 978-0-8213-8802-0
eISBN: 978-0-8213-8803-7
DOI: 10.1596/978-0-8213-8802-0
Cover design: Quantum Think
Cover photo: © World Bank/Scott Wallace
Library of Congress Cataloging-in-Publication Data
Growing old in an older Brazil : implications of population aging on growth, poverty,
public finance and service delivery / Michele Gragnolati ... [et al.].
p. cm. — (Directions in development)
Includes bibliographical references.
ISBN 978-0-8213-8802-0 (alk. paper) — ISBN 978-0-8213-8803-7 (ebk)
1. Older people—Brazil. 2. Old age assistance—Brazil. 3. Older people—Brazil—
Economic aspects. 4. Aging—Brazil. I. Gragnolati, Michele, 1968- II. World Bank.
HQ1064.B7D57 2011
305.260981—dc22
2011016220Contents
Foreword xv
Acknowledgments xix
Abbreviations and Acronyms xxi
Key Findings xxv
Chapter 1 Introduction and Overview 1
Motivation for the Study 1
Demographic Change in Brazil 5
The Economic Life Cycle 10
The Economic Implications of
Demographic Change 14
Poverty across the Life Cycle and the
Role of Public Transfers 16
Characteristics of Public Expenditures
across Generations and Age Groups 22
Cross-cutting Issues and Conclusions 30
Notes 39
References 40
v vi Contents
Chapter 2 Population Dynamics in Brazil 43
Trends in Mortality, Fertility, and Migration 45
Changes in Population Size and Age
Structure 54
Dependency Ratios, the Demographic Bonus, and
the Demographic Dividends 61
Labor Market 65
Notes 78
References 79
Chapter 3 Old Age Social Protection Programs and the
Aging Challenge 83
Structure of Brazil’s Social Protection System for
the Elderly 86
Achieving the Pension System Objectives 89
Challenges to the Pension System of a
Rapidly Aging Population 98
Conclusions 114
Notes 115
References 117
Chapter 4 Health Care and Long-Term Care 121
Health Care and Disease Patterns
in Brazil 123
The Strategy to Address Chronic Health
Care in Brazil 131
Long-Term Care 145
LTC Future Demand 155
Notes 160
References 162
Chapter 5 Productivity and Education 167
The Age-Productivity Profile 169
Opportunities to Improve Education and
On-the-Job Training 173
Wage–Productivity Gap 179
Age, Productivity, and Wages: New Evidence
from Brazilian Firms 183
Notes 190
References 191Contents vii
Chapter 6 Public Finance Implications of Population
Aging: 2005–50 195
Expenditures on Education, Health, and Social
Protection in Brazil 196
The Public Sector: Age Structure and the
Generosity of Public Benefits 199
Education 206
Pensions 210
Health Care 214
Overall Fiscal Impact of the Aging Population 219
Annex 6.1 223
Notes 228
References 229
Chapter 7 Financing Brazil’s Aging Population:
Implications for Saving and Growth 231
Aging, Saving, and Growth: The Empirical
Evidence 234
Aging and Saving 238
Aging, Capital Accumulation, and Demographic
Dividends 247
General Equilibrium Implications of Population
Aging 251
Government Macro-Policy Responses: Three
Scenarios 253
Heterogeneity in Economic Behavior 261
Annex 7.1: Private Saving Increases Cause Growth 263
Annex 7.2: The Partial Equilibrium Model 264
Annex 7.3: The General Equilibrium Model 266
Annex 7.4: The Reduced-Form General
Equilibrium Model 269
Annex 7.5: Open-Economy Implications for
Policy Scenarios 271
Notes 272
References 277
Index 283
Boxes
1.1 National Transfer Accounts 13
2.1 Source of Demographic Data 44viii Contents
3.1 World Bank Pension Conceptual Framework 100
3.2 Pension Reforms 104
5.1 Labor Market Informality in Brazil 172
5.2 Workforce Characteristics, Productivity, and Wages 184
Figures
1.1 The Speed of Population Aging 3
1.2 Life Expectancy at Birth and Total Fertility
Rate (TFR), 2005–10 6
1.3 Years to Reduce Fertility (TFR) from 3 to 2 and
Increase Life Expectancy from 50 to 70 7
1.4 Brazil: A Century of Changes in the Population
Age Structure, 1950–2050 9
1.5 Brazil: Aging Index, 1980–2050 10
1.6 Brazil: Total, Child, and Old-Age Dependency
Ratio, 1950–2050 11
1.7 Brazil: Income and Private Consumption, 2008 12
1.8 Normalized Life Cycle Deficit in Brazil vs.
Other NTA Countries, 1996 14
1.9 Brazil: Poverty Rates by Age with and without
Transfers, 1981 19
1.10 Brazil: P
Transfers, 1995 19
1.11 Brazil: Poverty Rates by Age with and without
Transfers, 2008 20
1.12 Brazil: Expenditures on Pensions and Public
Education, 1933–2000 23
1.13 Ratio of Net per Capita Public Transfers
(Elderly to Children) 23
1.14 Brazil: Net Present Value at Birth of Expected
Lifetime Total Transfers (Pensions and Education),
1923–2000 24
1.15 Brazil: Distribution of Total Public Expenditures
by Income and Age Group, 2006 26
1.16 Public Transfers as a Percent of Total Consumption 27
1.17 Role of Education in Children’s Consumption 28
1.18 Private Transfers to the Elderly as Percent of
Total Consumption 29
2.1 Demographic Transition in Brazil 44