Demographic Changes and the Gains from Globalisation: An Overlapping Generations CGE Analysis
AbstractThis paper develops a multi-country overlapping-generations general equilibrium model to gauge the economic impacts of demographic changes in the global economy and its transmission effects on different countries. Although severe demographic pressures contribute to significantly lower real GDP per capita across several regions in the world, globalisation through international trade generates an improvement in the terms of trade of older OECD countries, which sustains their real consumption per capita, while globalisation through capital flows stimulates capital deepening and therefore growth in younger countries such as India and various parts of the Rest of the World. The general equilibrium nature of the ageing process is crucial to understand the net foreign asset dynamics of countries during the demographic transition, and this is particularly relevant for a country like China that is caught, in the global economy, between relatively older and younger countries. On this regard China, unlike older countries, does not benefit from a terms of trade improvement which could otherwise sustain its consumption, nor does it benefit, unlike India, from capital deepening, which could otherwise sustain its GDP growth.
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Bibliographic InfoPaper provided by University of Ottawa, Department of Economics in its series Working Papers with number 0903E.
Length: 45 pages
Date of creation: 2009
Date of revision:
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Inequality Demographic transition; ageing; globalisation; overlapping generations; computable general equilibrium modeling;
Find related papers by JEL classification:
- D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
- J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
This paper has been announced in the following NEP Reports:
- NEP-AGE-2009-12-19 (Economics of Ageing)
- NEP-ALL-2009-12-19 (All new papers)
- NEP-CMP-2009-12-19 (Computational Economics)
- NEP-CWA-2009-12-19 (Central & Western Asia)
- NEP-DGE-2009-12-19 (Dynamic General Equilibrium)
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