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Aging, Pension Reform, and Capital Flows: A Multi-Country Simulation Model

Axel Börsch-Supan, Alexander Ludwig () and Joachim Winter ()

DNB Working Papers from Netherlands Central Bank, Research Department

Abstract: Population aging and pension reform will have profound effects on international capital markets. First, demographic change alters the time path of aggregate savings within each country. Second, this process may be amplified when a pension reform shifts old-age provision towards more pre-funding. Third, while the patterns of population aging are similar in most countries, timing and initial conditions differ substantially. Hence, to the extent that capital is internationally mobile, population aging will induce capital flows between countries. All three effects influence the rate of return to capital and interact with the demand for capital in production and with labor supply. In order to quantify these effects, we develop a computational general equilibrium model. We feed this multi-country overlapping generations model with detailed long-term demographic projections for seven world regions. Our simulations indicate that capital flows from fastaging regions to the rest of the world will initially be substantial but that trends are reversed when households decumulate savings. We also conclude that closed-economy models of pension reform miss quantitatively important effects of international capital mobility.

Keywords: aging; pension reform; capital mobility. (search for similar items in EconPapers)
JEL-codes: E27 F21 G15 H55 J11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cmp, nep-dge, nep-fmk, nep-mac and nep-pbe
Date: 2005-12
References: View references in EconPapers View complete reference list from CitEc
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https://www.dnb.nl/binaries/Working%20Paper%2065_tcm46-146722.pdf (application/pdf)

Related works:
Journal Article: Ageing, Pension Reform and Capital Flows: A Multi-Country Simulation Model (2006) Downloads
Working Paper: Aging, Pension Reform, and Capital Flows: A Multi-Country Simulation Model (2005) Downloads
Working Paper: Aging, pension reform, and capital flows: A multi-country simulation model (2005) Downloads
Working Paper: Aging, Pension Reform, and Capital Flows: A Multi-Country Simulation Model (2004) Downloads
Working Paper: Aging, pension reform, and capital flows: a multi-country simulation model (2004) Downloads
Working Paper: Aging, pension reform, and capital flows: A multi-country simulation model (2003) Downloads
Working Paper: Aging, pension reform and capital flows: a multi-country simulation model (2002) Downloads
Working Paper: Aging, pension reform, and capital flows: a multi-country simulation model (2001) Downloads
Working Paper: Aging, pension reform, and capital flows: A multi-country simulation model (2001) Downloads
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