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Aging, Factor Prices, and Capital Movements

Author

Listed:
  • Andrea Bonfatti

    (University of Padua)

  • Sagiri Kitao

    (Keio University)

  • Selahattin Imrohoroglu

    (University of Southern California)

Abstract

Populations in all major economies have been aging; the working age population has already started to decline in some and projections for future decades describe differential timing and extent of aging. To the extent that capital markets are integrated across regions, these different demographic trends and different fiscal responses to them will have differential implications on capital accumulation, labor supplies, and capital movements across regions. This paper develops a general equilibrium model of the world in which overlapping generations of individuals populate three regions under perfect capital mobility. As mentioned earlier, our idea is to view our world economy as consisting of three regions that have very different demographic trends. The HI region is aging earlier and faster than the MI region, and, Japan has been aging even earlier and faster than the HI region. By isolating Japan as a separate region, our framework aims to highlight the quantitative importance of the differential aging mechanism in studying fiscal sustainability in the Japanese economy.

Suggested Citation

  • Andrea Bonfatti & Sagiri Kitao & Selahattin Imrohoroglu, 2018. "Aging, Factor Prices, and Capital Movements," 2018 Meeting Papers 245, Society for Economic Dynamics.
    • Handle: RePEc:red:sed018:245
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    References listed on IDEAS

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