Changes in the Distribution of Resources across Generations in both the UK and the US

Intergenerational equity has become a major policy issue: there is a widespread perception that the younger generations have been relatively disadvantaged by economic and demographic changes over the last 30 years and are now finding it harder to finance their education, enter well-paid employment, purchase their first house and save for retirement than their parents did. The principal aim of this proposal is to inform the current discussion of how generational well-being has changed over this period, and to assist policymakers in assessing the inter-generational effect of different policy initiatives going forward.

We will achieve this by preparing Generational Wealth Accounts (GWA's), which generalise the system of National Transfer Accounts (NTA's), in order to investigate intergenerational transfers over the whole life course and not just within a chosen year. GWA's link annual NTA accounts by adjusting for expected births and deaths and including a lifetime resource constraint to measure expected public and private transfers to and from the unborn. GWA's can be regarded as an extension of Generational Accounting (GA), developed by Auerbach et al (1991), to include private transfers, human capital and market wealth in addition to public transfers. They thus present a comprehensive measure of generational resources, as well as the uses to which such resources are put.

Sub-aims of the project are:
1. To calculate a set of NTA's for the UK going back to 1975.
2. To use these to build Generational Wealth Accounts (GWA) for the UK and the US over the same period 1975-2014.
3. To use GWA to look at key questions. Firstly, whether current consumption profiles by age are sustainable, and secondly, the relative economic advantage of the different cohorts in terms of lifetime resources. We will develop a set of indicators that summarise these findings.
4. To look at the impact of two economic events on generational resources and on generational risk sharing. Firstly, we will examine how the impact of the financial crisis was shared across the generations. In particular, we will focus on whether the greater proportional fall in labour income experienced by the younger generations was partly offset by greater transfers from older generations. Secondly, we will investigate whether there is any evidence that any part of the huge transfer in resources to older generations as a result of the capital appreciation of fixed property value has been distributed back down to the younger generations through private transfers.
5. To compare the trends we observe in generational transfers in the UK to those in the US, and attempt to link these to institutional differences between the two countries.
6. To compare current GWA of the UK to those constructed for European countries, using NTA results from European teams.

The Government laid out its objectives for fiscal policy in its recent Charter for Budget Responsibility. The primary objective was to 'ensure sustainable public finances that support confidence in the economy, promote intergenerational fairness, and ensure the effectiveness of wider government policy'.

The aim of this project is to give academics, policy-makers and the broader public a clear analysis of the changes to the generational distribution of economic resources over the last 40 years. We also hope to shed light on what has driven these changes by comparing the UK to the US.

We will use a number of complementary and mutually supportive channels of knowledge exchange. Firstly we will publish in peer-reviewed academic journals. To reach a wider audience, we will also communicate our results through a number of outlets. We will be supported here by the Resolution Foundation, which has offered to sponsor the dissemination effort.

We will organise three conferences during the project's lifespan:
1. The first event to be within the six months of the start. The aim of this meeting is to introduce the GWA approach, gain an understanding of potential users' demands, and to establish a dialogue.
2. Around 18 months into the project, we will invite the European and US NTA teams and representatives from interested institutions (e.g. Eurostat, OBR) to a workshop. The aim of this workshop would be to present the details of our approach so it can be replicated across the network.
3. Towards the end of the project, the Resolution Foundation will fund an international conference on 'Intergenerational Fairness' during which our work will be showcased.
The project will actively manage the dissemination of the results to a broad audience:
1. We will establish a fully integrated web presence describing our on-going work and giving access to our working papers. The website, to be built by the Educational Technology Unit (ETU) at Imperial, will be linked to our partners - NTA Network, NIESR, Resolution Foundation - as well as other interested organisations such as the Intergenerational Foundation (IF), International Longevity Centre (ILC).
2. Given the interest in the topic, we anticipate significant media interest. With the support of the Resolution Foundation, we aim to prepare regular summaries of our findings in accessible language that can be used by members of the media and senior policymakers. Resolution Foundation has generated significant coverage recently on this issue and will shortly launch a major commission on intergenerational equity which our work will feed into.
3. The Resolution Foundation plans to maintain and update the work on project completion. They will make available the dataset in an easily accessible form. They also plan to build a model of the intergenerational distribution of resources around our dataset. The model will illustrate the generational trade-offs inherent in new policy initiatives. The Foundation will aim to use the model in a major programme of public policy work during this Parliament.

The project has a number of long-term ambitions:
1. To inform and shape the debate on generational fairness around well-researched statistics on the magnitude of and changes to the distribution of economic resources across the generations.
2. To build relationships with government institutions - HM Treasury, OBR and Bank of England in particular - so as to facilitate the adoption of GWA accounts as way of monitoring the generational distribution of economic resources. This is an essential step towards assessing the inter-generational impact of mooted policy changes and promoting intergenerational fairness. The team have had experience in effecting these changes in the past. Professor Sefton led an ESRC funded project to build the first UK Generational Accounts. The Office for Budget Responsibility has used this and later versions of the UK Generational in its reports.