Israel’s National Transfer Account: Income, Expenditures, and Life-Cycle Deficits

According to the definition of the Central Bureau of Statistics, national accounts “comprehensively and in detail describe the economic activity in the economy, the relationships among the country’s economic agents, and the links between the Israeli economy and abroad. […] This system is used to monitor economic developments, to conduct macroeconomic analysis, for economic planning and forecasting, and for international comparisons” (Central Bureau of Statistics, 2020, p. 221).

With the acceleration of population aging — a global phenomenon characteristic of both developed and developing countries, stemming primarily from increased life expectancy and declining fertility rates — there is a growing need for an analytical framework that can assess how of shifts in age composition affect economic activity and economic growth. In response to this need, at the end of the 1990s a complementary framework to national accounting was developed — National Transfer Accounts (NTA). It incorporates data on intergenerational transfers obtained from surveys representing the entire population into standard national accounts. The integration of micro and macro data enables an analysis of a country’s economy through the age distribution of its population. Moreover, simulating the expected changes in the age structure can provide a fairly detailed picture of the anticipated shifts in various macroeconomic indicators resulting from changes in age distribution.

In this paper, we present this innovative tool to researchers and decision makers in Israel in the belief that it can assist in shaping economic policy in accordance with expected demographic developments. Furthermore, to provide a more global perspective, we compare Israel’s NTA accounts with those of other countries around the world, highlighting Israel’s unique demographic-economic characteristics.