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

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

No 4064, 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 the effects of population aging and pension reform 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 fast-aging 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.

JEL-codes: E27 F21 G15 H55 J11 (search for similar items in EconPapers)
Date: 2004-11-11
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Downloads: (external link)
http://mea.mpisoc.mpg.de/uploads/user_mea_discussi ... rcmob_25Aug04_zs.pdf (application/pdf)

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 (2003)
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)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mea:meawpa:04064

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in MEA discussion paper series from Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy, Amalienstraße 33, 80799 München, Germany.
Bibliographic data for series maintained by Henning Frankenberger ().