The world is “graying” at an unprecedented rate. According to the UN’s World Population Prospects 2019, the number of persons over the age of 65 is growing the fastest and expected to more than double by 2050, then triple in another 50 years’ time.

Some Asian countries in particular, plagued by population aging, declining fertility, and gender imbalance, are facing a grim outlook for a demographic crisis. In Japan, one in five people is now 70 or older, birthrate has dropped to a historic level, and the population declined by more than a quarter of a million last year. Meanwhile, South Korea is aging more quickly than any other developed country: with seniors on the verge of making up 14% of the population, the country is on the cusp of becoming an “aged society.” The potential impact of population aging on the labor market and the fiscal pressures on the public systems of healthcare, pensions, and social protection schemes for older adults are some of the many problems that these and other countries must tackle.

Against this background, Shorenstein APARC recently held the third annual gathering of the Stanford Asia-Pacific Innovation project, a Center-led initiative that produces academic and policy-relevant research to promote innovation and entrepreneurship in East Asia. Held in Chuncheon, South Korea and organized jointly with Hallym University’s Institute for Communication Arts and Technology, this year’s conference focused on the intersection of aging, technological development, and innovation in the region.

(Gi-Wook Shin)

APARC Director Gi-Wook Shin opened the two-day session, introducing the conference’s themes. “What policies can promote innovation and entrepreneurship in aging populations?” Shin asked. “What opportunities do new technologies offer for addressing challenges posed by East Asia’s demographic shifts, and what are the threats involved in the adoption of these new technologies?”

Joon-Shik Park, vice president of the Office of Vision and Cooperation at Hallym University,  the conference host, noted that “East Asian countries are the most important testbeds on issues related to aging and innovation,” and that sharing meaningful research and implications from the region “will provide invaluable insights for all the societies around us.”

(From left to right, Yong Suk Lee , Junichi Yamanoi , Young-Bum Kim, and Jiyoung Liu)

Family Business Succession

Demographic forces and population aging at the macro level are altering family structures and assumptions at the micro level. For example, Junichi Yamanoi of Waseda University presented a study that examined how expectations around managerial succession at family firms had a significant impact on a firm’s long-term investments.

The study surveyed over 15,000 small and medium enterprises (SMEs) in the Tokyo metropolitan area. The participants were initially asked about their firm’s attributes, CEO demographics, and succession expectations. More than a year later (a time lag that eliminated reverse causality), a sampling of respondents was then asked about their current long-term investments (e.g., R&D, new product development, and internationalization activities).

Yamanoi and his coauthors found that, when a family business’ CEO was confident that a successor would follow, their firm was more likely to engage in long-term investment. Additionally, a CEO’s expectations that the successor would be someone other than their child resulted in an even greater likelihood of long-term investment.

As part of its policy propositions, the study recommends that government agencies and SME officers eager to increase investments by SMEs introduce external candidates to such firms. Moreover, family CEOs should be cautioned against investment decisions that are too short-term in orientation, as, due to inherent aversion to losses of socioemotional wealth for the family, they may unconsciously avoid long-term investments.

(Javier Miranda)

Rethinking Age and Entrepreneurship

At a luncheon keynote address, Javier Miranda, principal economist at the U.S. Census Bureau,  shared insights into the correlations between age and high-growth entrepreneurship, considering when in life people start firms and when they start the most successful firms.

Miranda acknowledged that youth is often perceived as being crucial to entrepreneurial success, referring to Mark Zuckerberg’s dictum, “Young people are just smarter.” Venture capitalist (VC) activity seems to support this notion, said Miranda, citing a sample of 35 VC-backed “unicorns” that resulted in a mean founder age of 31. He explained that VCs' high regard of young entrepreneurs may be attributed to a belief in young people's greater deductive reasoning, transformative thinking, and higher energy, optimism, and confidence.

But does the statistical evidence support such a view? It would seem not. Miranda’s data showed that the mean age for founders of any type of firm is 41.9. Furthermore, the mean age for founders of the most successful firms (those ready for Initial Public Offering market) was 45, and a founder at age 50 was approximately twice as likely to experience successful exit or high growth compared to a founder 20 years their junior.

In fact, dependent on the starting of a firm, the probability of a founder’s success peaked in the age range of 45-59. Pointing directly to entrepreneurs like Jobs and Bezos, Miranda conceded that even extremely talented people, who may be talented enough to succeed when young, peaked in middle age.

The results of Miranda’s study seem at odds with VC attraction to younger entrepreneurs. Experience, Miranda concluded, appeared to overwhelm any potential age advantage, but more research was needed to unpack the underlying predictors of entrepreneurial success over one’s life cycle.

Role of Technology in an Aging Populace

Day two of the conference focused on the promising role technology may play as populations age. APARC Research Scholar Kenji Kushida detailed both the current and impending problems Japan faces as its population both ages and shrinks in size, and the solutions possible through technological advancement like robotics, AI, and wearable devices.

For example, Japan’s demographic shift has had a double knock-on effect on agriculture, with the percentage of farm workers age 65 or older steadily rising over the last five years and the total cultivated agricultural land decreasing each passing year. Kushida described how ICT-enabled bulldozers allow farm owners to more precisely flatten the ground in rice paddies, resulting in both greater yields and cost savings as much as 40%.

Healthcare is another significant area of concern in Japan, as healthcare costs for people over 65 are four times that of younger people and medical costs as a proportion of GDP have been increasing sharply, especially in rural areas. Shortage of physicians and diagnostic technicians is another challenge. Kushida gave an example of a technology healthcare resource that enables clinics and hospitals to upload patient medical images which are then diagnosed by medical doctors affiliated with the tool's startup developer. This low-cost solution allows smaller, rural hospitals to tap into a larger network of physicians and specialists online.

While Japan’s technological trajectory has been driven primarily by the private sector, Kushida pointed out the important role played by government actors. Specifically, within the “Abenomics” reforms of Prime Minister Shinzo Abe, several key performance indicators include support for digitizing medical records, adoption of robotics in nursing care, and extending “healthy” life expectancy.

Edited volumes collecting the papers from the annual Stanford Asia-Pacific Innovation conferences are forthcoming. These will serve as valuable references for scholars and policymakers. The first conference was held at Stanford in 2017, and examined the industrial organization of businesses and innovation clusters and how such environments affect entrepreneurship. The second conference, held in September of 2018 in Beijing, analyzed the impact of public education and financial policies pursued by East Asian countries to promote entrepreneurship.

Larry Diamond looks at the global and domestic threats to the principles of liberal democracy for The Brian Lehrer Show. Listen here.

The following is a summary of Anja Manuel’s TEDx Palo Alto Talk on May 24, 2019

It is time we acknowledge that China systematically extracts the most advanced technology from the West, using both legal and nefarious means.  Instead of closing our own system to guard our inventions – as we’re beginning to do -- we must compete, and then in some cases, we can even cooperate.

There is nothing wrong with China wanting to rise and innovate. Indeed, many Chinese are first-rate inventors. However, China often doesn’t play fair. This harms our economy, our military readiness, and makes it harder for the West to set the global values for technology to ensure it develops safely.

President Xi has been public about China’s goals: by 2025, to domestically produce key technologies such as semi-conductors, 5G equipment, robots, self-driving and electric cars, and others, and by 2049, to lead in "national strength and international influence" with an army that can "fight and win.

Our western innovation system is based on private enterprise, unguarded universities, and open source research. Not China’s. Over the past few years, the world has woken up to China’s effort to vacuum up the world’s best technologies in a systematic effort, coordinated by the Communist Party. Their tactics include:

• Stealing trade secrets through human spies and cyber-theft, which costs the US economy between 180 and 540 billion dollars a year;
• Buying some of our most sophisticated companies: in recent years, Chinese participated in 10-16% of all US venture deals.
• Forcing US companies to hand over their intellectual property as the price of doing business.

China also has an impressive, entirely legal, whole-of-government effort to educate scientists and financially support key technologies. Unlike the American system, the Communist Party ensures that anything learned in private labs goes back to benefit the Chinese government and military.

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Through all these means, China is rapidly catching up. For example, Huawei – a Chinese company that has long benefited from government support -- leads the global market for 5G infrastructure that will run everything from our phones to the internet of things.  We don’t want to give any one company – Chinese or not -- the ability to shut down our electric grid, or, even, if they choose, make all the self-driving cars swerve off the road.

Where does this leave the United States?

So far, the U.S. response to China’s technological rise has been entirely defensive.  The U.S. government tightened up CFIUS laws last year to make it tougher for China to invest in our most advanced technologies, and is creating new broad export controls so our companies can’t sell cutting edge technology to China.  Some of this was long overdue and positive – but defensive measures alone won’t fix the problem and will hobble our most advanced companies.

Walls won’t work. We’re part of a global web of innovation. For example, semiconductors are often designed in the U.S. and manufactured in Korea, Japan and Taiwan. They are then shipped to China, assembled into phones and computers, and sold all over the world. Tech companies innovate everywhere: Alibaba has AI research labs in China, but also Russia, Singapore, Israel and in the US. Google does its advanced research in the U.S., but also China, Germany, India and elsewhere. Breaking up this web would be nearly impossible, and it would punish us as much as China.

To compete with China, we do NOT need to define the Chinese people as the "enemy" or close ourselves off from the world.  An offensive, positive strategy might look like this:

At the global level, we need to stop going it alone.  Pushing back jointly with our allies on China’s unfair trade practices would be far more effective than our current path of arguing with everyone about trade at once.

We need a "Tech 10" group of key countries who are willing to create and the norms to shape new technologies. Without democratic values and leadership, we will struggle to push back against the spread of China’s AI-enabled social control and surveillance systems, which it is already exporting to dictators around the world. We could see more dangerous gene editing experiments on humans, as previewed by the Chinese HIV immune baby in late 2018.  And we must create international norms to govern cyberwar and the use of robots in war while we still have the edge in these areas. China wouldn’t be excluded, but must accept the high standards set by the world.

The U.S. federal R&D budget should rise by billions of dollars. China is spending around 8.7% of its government budget on R&D, while the U.S. government spends less than three percent. Our science education must improve:  recently, the OECD ranked China 10th in the world in student math, science and reading scores, while the US ranked a measly 31st. We can’t lead the world if our kids can’t do math. On immigration, rather than banning China’s best minds from studying here, the U.S. should carefully vet Chinese students, and crack down hard on anyone actually caught spying, while welcoming those who don’t. Xenophobia is not the answer.

The private sector also has a role to play. Silicon Valley should cooperate with the U.S. government in reasonable ways rather than fighting it at every turn. The legendary early Silicon Valley companies – Fairchild Semiconductor, Varian, and others, all did this.  Within reason, we need our companies to be patriots again, instead of fixating on becoming unicorns.

China isn’t ten feet tall, and we can compete effectively if we start now.  If we shore up our own innovation system and steer the global values of tech in the right direction, we will have made all humans better off, and created a fair playing field. We can then even cooperate with China on clean tech, non-military uses of AI, and even some semiconductors, in very positive ways.
 

In the honor of publication of Larry Diamond's "Ill Winds: Saving Democracy from Russian Rage, Chinese Ambition, and American Complacency" Foreign Affairs are providing past the paywall article "Democracy Demotion: How the Freedom Agenda Fell Apart" by Larry Diamond. Read here. 

A new study by Stanford economists shows that giving fathers flexibility to take time off work in the months after their children are born improves the postpartum health and mental well-being of mothers.

In the study, slated for release by the National Bureau of Economic Research on June 3, Petra Persson and Maya Rossin-Slater examined the effects of a reform in Sweden that introduced more flexibility into the parental leave system. The 2012 law removed a prior restriction preventing a child’s mother and father from taking paid leave at the same time. And it allowed fathers to use up to 30 days of paid leave on an intermittent basis within a year of their child’s birth while the mothers were still on leave.

The policy change resulted in some clear benefits toward the mother’s health, including reductions in childbirth-related complications and postpartum anxiety, according to their empirical analysis.

“A lot of the discussion around how to support mothers is about mothers being able to take leave, but we often don’t think about the other part of the equation — fathers,” says Rossin-Slater, an assistant professor of health research and policy.

“Our study underscores that the father’s presence in the household shortly after childbirth can have important consequences for the new mother's physical and mental health,” says Persson, an assistant professor of economics.

Rossin-Slater and Persson are both faculty fellows at the Stanford Institute for Economic Policy Research.

Among their main findings of effects following the reform: Mothers are 14 percent less likely to need a specialist or be admitted to a hospital for childbirth-related complications — such as mastitis or other infections — within the first six months of childbirth. And they are 11 percent less likely to get an antibiotic prescription within that first half-year of their baby’s life.

There is also an overall 26 percent drop in the likelihood of any anti-anxiety prescriptions during that six-month postpartum period — with reductions in prescriptions being most pronounced during the first three months after childbirth.

What’s more, the study found that the average new father used paid leave for only a few days following the reform — far less than the maximum 30 days allowed — indicating how strong of a difference a couple of days of extra support for the mother could make.

“The key here is that families are granted the flexibility to decide, on a day-to-day basis, exactly when to have the dad stay home,” said Persson. “If, for example, the mom gets early symptoms of mastitis while breastfeeding, the dad can take one or two days off from work so that the mom can rest, which may avoid complications from the infection or the need for antibiotics.”

These indirect benefits from giving fathers workplace flexibility are not trivial matters when you consider the health issues mothers often face after childbirth and after they get home from the hospital, says Rossin-Slater, who is also a faculty member of Stanford Health Policy.

Infections and childbirth complications lead to one out of 100 women getting readmitted to the hospital within 30 days in the United States, according to the study.

Meanwhile, postpartum depression occurs for about one out of nine women, and maternal mortality has also been a rising trend over the past 25 years in the U.S.

The study comes as a growing number of lawmakers in the United States vocalize support for paid family leave but have failed to pass federal legislation.

Washington, D.C., and six states have adopted various paid family leave laws, but the U.S. remains the only industrialized nation in the world that does not have a national mandate guaranteeing a certain amount of paid parental leave.

Some federal lawmakers are working on family leave measures and have proposed such legislation over the past few years — including The Family Act, The New Parents Act — but none of them have ever gained enough traction to proceed in Congress.

This new study can help broaden the policy discussions, the researchers say.

The larger context around paid family leave policies is often framed today as a way to help narrow the gender wage gap by giving women more workplace flexibility and fewer career setbacks.

This study, however, shines a light on maternal health costs and how a policy on paid family leave — that includes workplace flexibility for the father — offers more benefits than previously thought, Rossin-Slater says.

“It's important to think not only about giving families access to some leave, but also about letting them have agency over how they use it,” she says.

And when it comes to concerns that fathers might use paid parental leave to goof off instead of spending the time as intended, the researchers say their study should assuage those worries.

“It's not like fathers are going to end up using a whole month to just stay home and watch TV. We don't find any evidence of that,” Rossin-Slater says. “Instead they only use a limited number of days precisely when the timing for that seems most beneficial for the family.”

“For all these reasons,” Persson says, “giving households flexibility in how to use paternity leave makes a lot of sense.”

We are thrilled to welcome Dr. HyoJung Jang back to the SPICE team! Jang holds a Ph.D. in Educational Theory and Policy as well as in Comparative and International Education from Penn State University, and an M.A. in East Asian Studies from Stanford University. She has returned to SPICE as an instructor for the Sejong Korean Scholars Program, an intensive online course on Korea for high school students across the United States.

Prior to pursuing her doctoral studies, Jang worked at SPICE developing extensive lesson plans for high school and college classrooms. She is co-author of several East Asia-focused curriculum units, including Inter-Korean Relations: Rivalry, Reconciliation, and Reunification, China in Transition: Economic Development, Migration, and Education, and Colonial Korea in Historical Perspective.

“It’s so wonderful to be back at SPICE, where my passion for education issues was sparked,” reflects Jang. “And it’s always inspiring to work with our young Sejong Scholars. Their sharp, inquisitive minds and sincere interest in Korea make me feel optimistic about the future of U.S.–Korean relations.”

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“But as I read what the communist party, what President Xi says, I don't see the same fervor to the ideological dimension of what China is doing around the world...[compared to what] the Soviets were doing.”

It was during the 2019 Oksenberg Conference that FSI Director Michael McFaul made the preceding assessment. Titled On the Brink: A New Cold War with China, the conference sought to explore the causes underlying today’s intensified conflict between the United States and China. McFaul was joined on stage by APARC's Oksenberg-Rohlen Fellow David M. Lampton and China Program Director Jean Oi. Their panel followed an earlier fireside chat featuring keynote speaker Dr. Condoleezza Rice.

Rice, the 66th U.S. Secretary of State, opened the program with a wide-ranging conversation with Oi regarding our rapidly deteriorating trade relations with China. Among other topics, Secretary Rice drew contrasts between our current tensions with China and the Soviet-era Cold War; the potential sources of China’s increasing nationalism; and what the appropriate U.S. policy responses could be.

Condoleezza Rice (right) listens on as Jean Oi addresses the audience

Dr. Jean Oi (left) and Dr. Condoleezza Rice

Audio recordings and transcripts of the formal remarks by McFaul and Lampton are available below.

The annual Oksenberg Conference honors the legacy of Professor Michel Oksenberg. A renowned China scholar and senior fellow at Shorenstein APARC, Professor Oksenberg served as a key member of President Jimmy Carter’s National Security Council, guiding the United States towards normalized relations with China and consistently urging that the U.S. engage with Asia in a more considered manner.

People today can generally expect to live longer and, in some parts of the world, healthier lives. The substantial increases in life expectancy underlying these global demographic shifts represent a human triumph over disease, hunger, and deprivation, but also pose difficult challenges across multiple sectors. Population aging will have dramatic effects on labor supply, patterns of work and retirement, family and social structures, healthcare services, savings, and, of course, pension systems and other social support programs used by older adults. Individuals, communities, and nations around the world must adapt quickly to the demographic reality facing us and design new approaches to financing the many needs that come with longer lives.

This imperative is the focus of a newly published special issue of The Journal of the Economics of Ageing, entitled Financing Longevity: The Economics of Pensions, Health and Long-term Care. The special issue collects articles originally written for and discussed at a conference that was dedicated to the same topic and held at Stanford in April 2017 to mark the tenth anniversary of APARC’s Asia Health Policy Program (AHPP). The conference convened top experts in health economics and policy to examine empirical and theoretical research on a range of problems pertinent to the economics of aging from the perspective of sustainable financing for long lives. The economics of the demographic transition is one of the research areas that Karen Eggleston, APARC’s deputy director and AHPP director, studies. She co-edited the special issue with Anita Mukherjee, a Stanford graduate now assistant professor in the Department of Risk and Insurance at the Wisconsin School of Business, University of Wisconsin-Madison.

The Financing Longevity conference was organized by The Next World Program, a Consortium composed of partners from Harvard University, Fudan University, Stanford University, and the World Demographic and Aging Forum, and was cosponsored by AHPP, the Stanford Institute for Economic Policy Research, and the Stanford Center on the Demography and Economics of Aging.

The contributions that originated from the conference and are collected in the Journal’s special issue cover comparative research on more than 30 European countries and 17 Latin American countries, as well as studies on Australia, the United States, India, China, and Japan. They analyze a variety of questions pertinent to financing longevity, including how pension structures may exacerbate existing social inequalities; how formal and informal insurance interact in securing long-term care needs; the ways in which the elderly cope with caregiving and cognitive decline; and what new approaches might help extend old-age financial security to those working outside the formal sector, which is a major concern in low-income countries.

Another challenge of utmost importance is the global pension crisis, caused due to committed payments that far exceed the saved resources. It is a problem that Eggleston and Mukherjee highlight in their introduction to the special issue. By 2050, they note, the pension gap facing the world’s eight largest pension systems is expected to reach nearly US $400 trillion. The problem cannot be ignored, as “the financial security of people leading longer lives is in serious jeopardy.” Indeed four of the eight research papers in the special issue shed light on pensions and inequality in income support for older adults. The other four research papers focus on health and its interaction with labor force participation, savings, and long-term care.

The issue also features two special contributions. The first is an interview with Olivia S. Mitchell, a professor at the University of Pennsylvania’s Wharton School and worldwide expert on pensions and ageing. Mitchell explains the areas offering the most promise and excitement in her field; discusses ways to encourage delayed retirement and spur more saving; and suggests several priority areas for future research. The latter include applying behavioral insights to questions about retirement planning, improving financial literacy, and advancing innovations to help people imagine themselves at older ages and save more for their future selves.

The second unique contribution is a perspective on the challenges of financing longevity in Japan, based on the keynote address delivered at the 2017 Stanford conference by Mr. Hirotaka Unami, then senior Director for policy planning and research of the Minister’s secretariat of the Japan Ministry of Finance and currently deputy director general with the Ministry’s Budget Bureau.

In Japan, decades of improving life expectancy and falling birth rates have produced a rapidly aging and now shrinking population. Data released by Japan’s Statistics Bureau ahead of Children's Day on May 5, 2019 reveal that Japan’s child population (those younger than 15) ranks lowest among countries with a total population exceeding 40 million. In his piece, Unami focuses on the difficult tradeoffs Japan faces in responding to the increase in oldest-old population (people aged 75 and over) and the overall population decline. Japan aspires to do so through policies that are designed to restore financial sustainability for the country’s social security system, including the medical care and long-term care insurance systems.

Unami argues that Japan must simultaneously pursue a combination of increased tax revenues, reduced benefit growth, and accelerated economic growth. He notes that these three-pronged efforts require action in five areas: review Japan’s pension policies; reduce the scope of insurance coverage in low-risk areas; increase the effectiveness of health service providers; increase a beneficiary’s burden according to their means; and enhance policies for preventive health care for the elderly.

The aging of our world’s population is a defining issue of our time and there is pressing need for research to inform policies intended to improve the financial well-being of present and future generations. The articles collected in the Financing Longevity special issue and the ongoing work by APARC’s Asia Health Policy Program point to multiple areas ripe for such future research.

View the complete special issue >>

Learn more about Dr. Karen Eggleston’s work in the area of innovation for healthy aging >>