Demographic Change, International Trade and Capital Flows

Igor Fedotenkov, Bas van Groezen and Lex Meijdam

Open Economies Review, 2014, vol. 25, issue 5, 865-883

Abstract: Trade in goods that are not perfect substitutes can considerably change the predictions of standard neoclassical models about the effects of demographic developments. This paper considers a relative decrease in the population size of one country, when countries specialize in the production of different intermediate goods. The degree of substitutability is crucial for the direction of capital flows between the countries and for the development of wages. The less those goods are substitutes, the stronger the long-run international spillover effects of a demographic shock will be. For the interest rate effects, also international differences in saving rates due to e.g., different pension schemes have to be taken into account. Copyright Springer Science+Business Media New York 2014

Keywords: International trade; Demographic shock; Overlapping generations; Pensions; Spillover effects; F41; H55; J11 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (11)

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DOI: 10.1007/s11079-014-9311-2

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