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Aging and International Capital Flows

  • Axel Börsch-Supan

    ()

  • Alexander Ludwig

    ()

  • Joachim Winter

    ()

    (Munich Center for the Economics of Aging (MEA))

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 Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy in its series MEA discussion paper series with number 02010.

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Date of creation: 21 Jan 2002
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Handle: RePEc:mea:meawpa:02010
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