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Aging and International Capital Flows

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  • Börsch-Supan, Axel
  • Ludwig, Alexander
  • Winter, Joachim

Abstract

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 longterm 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. Closedeconomy models of pension reform are likely to miss quantitatively important effects of international capital mobility.

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Paper provided by Institut fuer Volkswirtschaftslehre und Statistik, Abteilung fuer Volkswirtschaftslehre in its series Discussion Papers with number 605.

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Date of creation: 2001
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Handle: RePEc:mnh:vpaper:1006

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  1. Börsch-Supan, Axel & Brugiavini, Agar, 2000. "Savings: The Policy Debate in Europe," Sonderforschungsbereich 504 Publications, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim 01-14, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
  2. Mariacristina De Nardi & Selahattin Imrohoroglu & Thomas J. Sargent, 1999. "Projected U.S. Demographics and Social Security," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(3), pages 575-615, July.
  3. Fougere, Maxime & Merette, Marcel, 1999. "Population ageing and economic growth in seven OECD countries," Economic Modelling, Elsevier, Elsevier, vol. 16(3), pages 411-427, August.
  4. Holzmann, Robert, 2000. "Can investments in emerging markets help to solve the aging problem ?," Social Protection Discussion Papers 23070, The World Bank.
  5. Maddison, Angus, 1987. "Growth and Slowdown in Advanced Capitalist Economies: Techniques of Quantitative Assessment," Journal of Economic Literature, American Economic Association, vol. 25(2), pages 649-98, June.
  6. French, Kenneth R & Poterba, James M, 1991. "Investor Diversification and International Equity Markets," American Economic Review, American Economic Association, American Economic Association, vol. 81(2), pages 222-26, May.
  7. Miles, David & Iben, Andreas, 2000. "The Reform of Pension Systems: Winners and Losers across Generations in the United Kingdom and Germany," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 67(266), pages 203-28, May.
  8. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, December.
  9. David E. Bloom & Jeffrey G. Williamson, 1997. "Demographic Transitions and Economic Miracles in Emerging Asia," NBER Working Papers 6268, National Bureau of Economic Research, Inc.
  10. David Miles & Allan Timmermann, 1999. "Risk sharing and transition costs in the reform of pension systems in Europe," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 14(29), pages 251-286, October.
  11. Fehr, Hans, 1999. "Pension reform during the demographic transition," W.E.P. - Würzburg Economic Papers 8, University of Würzburg, Chair for Monetary Policy and International Economics.
  12. Börsch-Supan, Axel H. & Heiss, Florian & Ludwig, Alexander & Winter, Joachim, 2003. "Pension reform, capital markets and the rate of return," Munich Reprints in Economics, University of Munich, Department of Economics 20200, University of Munich, Department of Economics.
  13. Obstfeld, Maurice & Rogoff, Kenneth, 2000. "The Six Major Puzzles in International Macroeconomics: Is There a Common Cause?," Center for International and Development Economics Research, Working Paper Series, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkele qt0sx02651, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
  14. Higgins, Matthew, 1998. "Demography, National Savings, and International Capital Flows," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 343-69, May.
  15. Feldstein, Martin & Horioka, Charles, 1980. "Domestic Saving and International Capital Flows," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 90(358), pages 314-29, June.
  16. Willi Leibfritz & Deborah Roseveare & Douglas Fore & Eckhard Wurzel, 1995. "Ageing Populations, Pension Systems and Government Budgets: How Do They Affect Saving?," OECD Economics Department Working Papers 156, OECD Publishing.
  17. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 66, pages 467.
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