Aging, pension reform, and capital flows: A multi-country simulation model

Alexander Ludwig, Joachim Winter () and Börsch-Supan, Axel ()
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Börsch-Supan, Axel: Munich Center for the Economics of Aging (MEA), Postal: Amalienstr. 33, D-80799 Munich

No 3028, MEA discussion paper series from Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy

Abstract: We present a quantitative analysis of international capital flows induced by differential population aging and pension reform. It is well known that within each country, demographic change alters the time path of aggregate savings. This process may be amplified if pension reform shifts old-age provision towards more pre-funding. 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. In order to quantify these effects, we develop a multi-country overlapping generations model and use long-term demographic projections for several world regions to project international capital flows in the course of population aging. Our simulations suggest that capital flows from fast-aging industrial countries such as Germany, Italy or Japan to the rest of the world will be substantial. We also conclude that closed-economy models of pension reform miss quantitatively important effects of international capital mobility.

JEL-codes: E27 F21 G15 H55 J11 (search for similar items in EconPapers)
Date: 2003-04-09
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Citations: View citations in EconPapers (22)

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