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

Axel Börsch-Supan (), Alexander Ludwig and Joachim Winter ()
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Axel Börsch-Supan: Sonderforschungsbereich 504, Postal: L 13, 15, D-68131 Mannheim

No 01-08, Sonderforschungsbereich 504 Publications from Sonderforschungsbereich 504, Universität Mannheim, Sonderforschungsbereich 504, University of Mannheim

Abstract: In this paper, we present a quantitative analysis of the international capital flows induced by differences in population aging processes across countries and by pension reforms. In the vast majority of countries, demographic change will continue well into the 21st century. It is well known that within each country, demographic change alters the time path of aggregate savings, even more so in countries where fundamental pension reforms and shifts towards more pre-funding are implemented. While the patterns of population aging are similar in most countries, the timing differs substantially, in particular between industrialized and less developed countries. To the extent that capital is internationally mobile, population aging will therefore induce capital flows between countries. In order to quantify these effects, we develop a stylized multi-country overlapping generations model, and we use long-term demographic projections for several world regions to simulate international capital flows over a 50 year horizon. Our simulations suggest that capital flows from fast-aging industrial countries such as Germany to the rest of the world will be substantial. Closed-economy models of pen-sion reform are likely to miss quantitatively important effects of international capital mobility.

Pages: 30 pages
Date: 2001-01-15
New Economics Papers: this item is included in nep-cmp and nep-ifn
Note: This research project was partially supported by the Gesamtverband der deutschen Versicherungswirtschaft and by the Deutsche Forschungsgemeinschaft.
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Citations: View citations in EconPapers (3)

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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 (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)
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