Paper short abstract:

This paper investigates to what extent the family serves as a bulwark against generational conflict in aging Japan and Germany. Discussing welfare and family regimes, hypotheses are tested using the latest two waves of National Transfer Accounts macrodata. Japan's prospects are direr than Germany's.

Paper long abstract:

Various works have argued that population ageing, leading to higher dependency ratios, provokes generational conflict in terms of a battle over scarce resources. But while in numerous post-industrial economies, the younger cohorts are put at a comparative disadvantage through the labour market and the public sector, there has also been the tendency to alleviate these imbalances through informal downward transfers in the family sphere. Comparing Japan and Germany, two pioneers of ageing, this paper investigates whether and to what extent the family as an institution can serve as a bulwark against generational conflict. Discussing their demographic positions in the context of OECD countries as well as their welfare regimes, family traditions and policies causing welfare transition processes in either country, the results are also relevant for a wider set of countries facing population ageing. As a commonality, financial pressure on the individual has increased in the last years due to changes in living arrangements, income levels and liberalising welfare policies. While this pressure has been stronger in Japan, the family policy response has been more comprehensive in Germany. The traditional role of the family, though, is even stronger in Japan than in Germany. According to typologies of Esping-Andersen (1990) and Shinkawa (2013), Japan's welfare and family regimes are found to be transitioning rather towards a liberal market-oriented type. Germany's transition includes social-democratic and liberal elements. Departing from the logic of Brumberg and Modigliani's (1954) lifecycle model and Mudrazija's (2014) extension with overlapping generations and different welfare regimes, hypotheses are tested using the two most recent waves of National Transfers Accounts (2004 and 2009 for Japan, 2003 and 2008 for Germany), a macro-database of intergenerational financial flows adhering to the methodology of national accounting. The data show that while the individual income deficit over the lifecycle has increased, the elderly serve as a safety net for more precarious younger cohorts in both countries. At the same time, individual assets such as savings are increasingly more important. Considering demographic and household-financial dynamics and policy responses, it turns out that Japan's prospects for the family as a safety net are direr than Germany's.