Can we keep the pre-crisis living standards? An analysis based on NTA profiles in Spain

In the context of the deep economic crisis affecting most western countries, but specially Southern Europe, some voices have claimed that Spaniards had been living beyond their means. In this paper, we try to shed some light on this issue by using National Transfer Accounts (NTA). We estimate the NTA for 2008 and compare them with the obtained previously for 2000 (Patxot et al., 2011a), obtaining interesting conclusions. The aggregated lifecycle deficit - difference between consumption and labour income - has increased from 8.8% of GDP in 2000 to 10.1% in 2008. The aggregated LCD evolution is driven on the one hand by the change in per capita profiles and, on the other hand by the change in population age structure. Along the observed period, the effect of population has been quite positive, due to the effect of migration, so that the economic support ratio has increased. In absence of population changes, LCD would have increased 2 percentage more points in terms of GDP. Nevertheless, the positive effect of population age structure is ending and the opposite effect is expected for the next decades with the baby boom retirement. Hence, our conclusion is that the levels of labour income and consumption by age observed in 2008 are not sustainable in the coming decades.