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Demography, capital flows and unemployment

Luca Marchiori (), Olivier Pierrard () and Henri Sneessens ()

No 2011040, Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: This paper contributes to the already vast literature on demography-induced international capital flows by examining the role of labor market imperfections and institutions. We setup a two-country overlapping generations model with search unemployment, which we calibrate on EU15 and US data. Labor market imperfections are found to significantly increase the volume of capital flows, because of stronger employment adjustments in comparison with a competitive economy. We next exploit themodel to investigate how demographic asymmetriesmay have contributed to unemployment and welfare changes in the recent past (1950-2010). We show that a policy reform in one country also has an impact on labor markets in other countries when capital is mobile.

Keywords: demographics; capital flows; overlapping generations; general equilibrium; unemployment (search for similar items in EconPapers)
JEL-codes: C68 D91 E24 F21 J11 (search for similar items in EconPapers)
Pages: 45
Date: 2011-10-31
New Economics Papers: this item is included in nep-dem, nep-dge and nep-lab
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http://sites.uclouvain.be/econ/DP/IRES/2011040.pdf (application/pdf)

Related works:
Working Paper: Demography, capital flows and unemployment (2011) Downloads
Working Paper: Demography, Capital Flows and Unemployment (2011) Downloads
Working Paper: Demography, capital flows and unemployment (2011) Downloads
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