The Impact of Education and Health Heterogeneity on Generational Support Ratios in Mexico

PWP-CCPR-2013-005

Abstract

Policymakers around the world are concerned about the socioeconomic consequences of population aging in terms of who will bear the costs of older generations. Their policies often rely on estimations of support ratios based solely on the age structure of the population. In this paper, we estimate generational support ratios (GSRs) to examine the dependency of older generations to new generations, taking into account health heterogeneity in the older population and education heterogeneity in the offspring generation that will provide for them.

Moreover, since educational expansion have occurred in tandem with improvements in health, we explore what would be the effect of a public policy that changes the education of a targeted subgroup of women when they were young once these women become older. We explore how changes in women’s educational distribution (i) affect women’s health distribution when they become old, and (ii) affect GSRs through changes in intermediate demographic processes, such as assortative mating, fertility behavior, and intergenerational transmission of education. Finally, we conduct a series of simulations to show the contribution that each demographic process has on changes in GSRs. Our study site is Mexico, one of the most rapidly aging countries around the world.

Our results indicate that improvements in women’s education lead to (i) improvements in health (ii) declines in GSRs of all offspring per elderly due to associated reductions in fertility, but this decrease is not substantial; (iii) increases in the number of college-educated offspring per unhealthy elderly due to improvements in both offspring’s education and elderly health. Moreover, all the improvements observed in the health distribution of women are boosted by the changes of demographic behaviors. Finally, our results highlight the importance of taking into account changes in demographic behaviors in the estimation of changes in support ratios, because improvements in offspring’s education and in elderly health may mitigate the negative consequences associated with population aging.