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Globalization, Social Security, and International Transfers


  • F.L. MacKellar
  • T.Y. Ermolieva
  • H. Reisen


In this paper, we quantify the impact of globalization (i.e., integration of global capital markets) on intergenerational transfers mediated through Pay As You Go (PAYG) public pension systems in more developed countries (MDCs), as well as impacts on the intergenerational distribution of income and wealth. Our basic finding is that, while globalization is likely to erode the pension income of older persons, it will enhance their wealth, leaving their overall spending power little changed. The working age population, which earns lower wages, is an unambiguous loser from the globalization process, at least to the extent that we limit ourselves to a neoclassical analysis of the phenomenon. The main impact of globalization is unlikely, however, to be captured by economy-wide averages such as those presented in this paper. This is the redistribution from lifetime non-savers, especially the poor, who depend on labor income while young and wage-based intergenerational transfers when old, to lifetime savers, who are able to take advantage of improved capital returns. While we concentrate on MDCs in this paper, we make the point that economic impacts of globalization in less developed countries (LDCs) are opposite in sign and greater in relative magnitude. The latter is the case because reallocation of capital gives rise to a greater proportional change in the capital-output ratio in LDCs than in MDCs.

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  • F.L. MacKellar & T.Y. Ermolieva & H. Reisen, 1999. "Globalization, Social Security, and International Transfers," Working Papers ir99056, International Institute for Applied Systems Analysis.
  • Handle: RePEc:wop:iasawp:ir99056

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    References listed on IDEAS

    1. 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, vol. 39(2), pages 343-369, May.
    2. Paul R. Masson & Ralph W. Tryon, 1990. "Macroeconomic Effects of Projected Population Aging in Industrial Countries," IMF Staff Papers, Palgrave Macmillan, vol. 37(3), pages 453-485, September.
    3. F.L. MacKellar & H. Reisen, 1998. "International Diversification of Pension Assets Is No Panacea for Population Aging," Working Papers ir98034, International Institute for Applied Systems Analysis.
    4. David M. Cutler & James M. Poterba & Louise M. Sheiner & Lawrence H. Summers, 1990. "An Aging Society: Opportunity or Challenge?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(1), pages 1-74.
    5. Guillermo Larraín & Helmut Reisen & Julia von Maltzan, 1997. "Emerging Market Risk and Sovereign Credit Ratings," OECD Development Centre Working Papers 124, OECD Publishing.
    6. Alan M. Taylor, 1996. "International Capital Mobility in History: The Saving-Investment Relationship," NBER Working Papers 5743, National Bureau of Economic Research, Inc.
    7. repec:fth:harver:1490 is not listed on IDEAS
    8. Sylvester J. Schieber & John B. Shoven, 1994. "The Consequences of Population Aging on Private Pension Fund Saving and Asset Markets," NBER Working Papers 4665, National Bureau of Economic Research, Inc.
    9. Landis MacKellar & Helmut Reisen, 1998. "A Simulation Model of Global Pension Investment," OECD Development Centre Working Papers 137, OECD Publishing.
    10. F.L. MacKellar & T.Y. Ermolieva, 1999. "The IIASA Social Security Reform Project Multiregional Economic-Demographic Growth Model: Policy Background and Algebraic Structure," Working Papers ir99007, International Institute for Applied Systems Analysis.
    11. A. Westlund & T.Y. Ermolieva & F.L. MacKellar, 1999. "Analysis and Forecasting of Social Security: A Study of Robustness," Working Papers ir99004, International Institute for Applied Systems Analysis.
    12. Blanchet, Didier & Kessler, Denis, 1992. "Pension Systems in Transition Economies: Perspectives and Choices Ahead," Public Finance = Finances publiques, , vol. 47(Supplemen), pages 21-33.
    13. Peter S. Yoo, 1994. "Boom or bust? the economic effects of the baby boom," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 13-22.
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    Cited by:

    1. Robert Holzmann, 2002. "Can Investments in Emerging Markets Help to Solve the Ageing Problem?," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 1(2), pages 215-241, September.

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