Throughout the world, population aging is a major challenge that will continue well into the 21st century. While the patterns of the demographic transition are similar in most countries, timing differs substantially, in particular between industrialized and less developed countries. To the extent that capital is internationally mobile, population aging will therefore induce capital flows between countries. In order to quantify these international capital flows, we employ a multi-country overlapping generations model and combine it with long-term demographic projections for several world regions over a 50 year horizon. Our simulations suggest that capital flows from fast-aging industrial countries (such as Germany and Italy) to the rest of the world will be substantial. Closed-economy models of pension reform are likely to miss quantitatively important effects of international capital mobility.
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Paper provided by Mannheim Research Institute for the Economics of Aging (MEA), University of Mannheim in its series MEA discussion paper series with number
02010.
Length: Date of creation: 21 Jan 2002 Date of revision: Handle: RePEc:mea:meawpa:02010
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Find related papers by JEL classification: E27 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements G15 - Financial Economics - - General Financial Markets - - - International Financial Markets H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends and Forecasts
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