In the course of their lifetime people consume, produce, save and share resources, and the activities they carry out vary significantly depending on the moment in their life cycle. In childhood, children’s needs take priority over any other economic activity and basically resources are received from other generations (through care given by families or through public transfers, such as education and health). Adulthood brings incorporation into the labour market; it is in this stage that the population, in addition to consuming, obtains income from work, has the capacity to transfer resources to other people (chiefly children or dependent older people) and saves. Finally, when the elderly retire from the labour market, their main earned income disappears, and their consumption and needs are met through other types of resources such as savings or transfers from their families or the public sector.

This entails the need for a system of transfers between the different generations. Intergenerational economics provides an insight into how societies organise these economic transfers and how this organisation can be affected by certain economic, social and demographic changes. During their active age individuals generate a surplus in the production of economic resources, whereas in childhood and old age consumption needs prevail. In intergenerational economics, consumption refers to the necessary economic resources to cover one’s own needs. The difference between consumption and labour income at each age is known as the life cycle deficit.

National transfer accounts, a tool used in the preparation of this article, are highly relevant for the analysis of intergenerational economics, as they provide age profiles of consumption and labour income.

In addition to the use of the capital market, there are two main mechanisms for reallocating resources to fund the life cycle deficit between generations. One of these is contributions from families: through the intergenerational pact, people of working age take direct responsibility for the consumption needs of their children and elders. Family transfers take place primarily from (working-age) parents to children. The other mechanism is contributions from the public sector: the welfare state guarantees minimum living standards for all citizens through programmes of interpersonal income distribution (from rich to poor) and intergenerational income distribution (retirement pensions, health and education). Public transfers are articulated to a large extent as transfers from working-age individuals (who pay more taxes) to those who are not active (mostly older people and children).

Figure 2 shows the estimates of the two main intergenerational resource transfer mechanisms in Spain. Public transfers present the expected profile: they are positive in both stages of dependency in the life cycle, childhood and old age, as people in these stages receive transfers from the public sector to cover their consumption needs, especially in the case of the elderly (pensions and health). In contrast, during the central stage of working life (from age 27 to 59), the economic resources generated are greater than those consumed; this surplus serves to cover the transfers received by both children and the elderly. Family transfers, i.e., economic resources that families devote directly to guaranteeing the consumption needs of depend- ent people, are children’s main funding source (much greater than public transfers). On the other hand, working-age adults are donors: through their labour income they cater for the needs of their children (negative values in the graph).

Public transfers of economic resources to finance the life cycle deficit vary from country to country, depending on the development of the welfare state in each of them. When analysing this issue it is important to differentiate between two concepts: transfers received and transfers paid at each age. Transfers received refer to public resources obtained in order to cover consumption needs. These transfers are received both as money transfers, in cash (pensions, unemployment benefit) and as services, in kind (education, health). Public transfers paid, however, are those economic resources that are contributed to finance other people’s consumption needs (mostly through taxation).

As we can see in figure 3, public transfers between generations are greater in Sweden than in the rest of the EU-25 member states shown in the figure, owing to the greater development of the welfare state in that country. The level of public transfers received by older people is especially notable, representing almost double the average labour income of the country between the ages of 30 and 49. This is explained by the fact that Sweden has implemented far-reaching long-term care support programmes. Furthermore, public transfers received by children are higher than in the other countries. For all these reasons, taxation in Sweden (transfers paid) is higher than in other countries such as Spain, which has fewer public transfer programmes.

To cover the needs of all people, in addition to money and service transfers, household work and care are also required. The production of these resources is not remunerated and does not necessarily involve either the labour market or public transfers. In other words, no economic value is directly attached to this type of work. However, household work and caregiving are of great importance for covering people’s needs. It must be stressed, moreover, that these tasks are performed by women more than by men. It is therefore crucial to take this type of work into consideration in order to obtain a comprehensive study of intergenerational transfers and identify the gender biases that occur in them.

The production of this type of unpaid resources is estimated by taking into account the time spent carrying out the activities of caregiving and household work. Time-use surveys are the main information source in this respect. In Spain this information is made available through the Encuesta de Empleo del Tiempo (Time-Use Survey) conducted by the Instituto Nacional de Estadística (National Institute of Statistics).

Up to the age of 18 or 20, most young people are engaged in education. After that age they begin to increase their participation in productive activities and wage earning. From youth onwards, women devote more hours to household production than men, who focus on market or paid production. The gap is particularly apparent as of the age of 30. Between the ages of 20 and 60, men devote more hours to paid activities than to housework. The data shows that, on average, Spanish women aged between 21 and 65 work 1.1 hours more per day than men of the same age, and the gap widens with age (Abio et al., 2019).

In the beginning and end stages of people’s life cycle the ability to work and generate resources is lacking; they depend on what is provided by their family and the public sector or, in the case of the elderly, any savings they may have been able to accumulate. How intergenerational transfers are organised and occur conditions the overall well-being of a society in many ways, as they help the population to face the future with guarantees.

Studying intergenerational economics provides an insight into how intergenerational transfers should be organised. One of its most notable applications is the use, for study purposes, of the so-called demographic dividend (the effects of the change in age structure on economic growth). In the context of today’s societies, which face the challenge of ageing, it is crucial to have in-depth knowledge of how transfers of resources between people of different ages take place and how they should be readapted to the demographic transition.

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