Demographic change, relative factor prices, international capital flows, and their differential effects on the welfare of generations


Börsch-Supan, Axel ; Krueger, Dirk ; Ludwig, Alexander


[img]
Preview
PDF
dp07_14.pdf - Published

Download (391kB)

URL: https://ub-madoc.bib.uni-mannheim.de/2553
URN: urn:nbn:de:bsz:180-madoc-25534
Document Type: Working paper
Year of publication: 2007
The title of a journal, publication series: Working paper series / Sonderforschungsbereich 504, Rationalitätskonzepte, Entscheidungsverhalten und Ökonomische Modellierung
Volume: 07-14
Place of publication: Mannheim
Publication language: English
Institution: School of Law and Economics > Sonstige - Fakultät für Rechtswissenschaft und Volkswirtschaftslehre
MADOC publication series: Sonderforschungsbereich 504 > Rationalitätskonzepte, Entscheidungsverhalten und ökonomische Modellierung (Laufzeit 1997 - 2008)
Subject: 300 Social sciences, sociology, anthropology
Classification: JEL: C68 D33 E25 E17 ,
Subject headings (SWD): Bevölkerung , Altersstruktur , Faktorpreis , Internationale Kapitalbewegung , Lohnstruktur , Kapitalertrag , Generationsbeziehung , Wohlfahrtseffekt
Keywords (English): Population Aging , Relative Factor Prices , International Capital Flows , Distribution of Welfare
Abstract: Demographic change has differential impacts on the welfare of current and future generations. In a simple closed economy, aging -- a relative scarcity of young workers -- increases wages, increasing the welfare of the young. At the same time, population aging will reduce rates of return to capital, thereby reducing the welfare of asset holders who are usually older than the population average. In a global world with pension systems, however, these effects are less straightforward, since international capital flows dampen the factor price changes. Moreover, pay-as-you-go pension systems financed by payroll taxes create a wedge between net and gross wages, and their intergenerational redistribution has important additional effects on the welfare of generations. To quantify these effects, we develop a large-scale multi-country overlapping generations model with uninsurable labor productivity and mortality risk. Due to the predicted relative abundance of the factor capital, the rate of return falls between 2005 and 2050 by roughly 90 basis points. Our simulations indicate that capital flows from rapidly ageing regions to the rest of the world will initially be substantial, but that trends are reversed when households de-cumulate savings. In terms of welfare, our model suggests that young individuals with little assets and currently low labor productivity indeed gain from higher wages associated with population aging. Older, asset-rich households tend to loose because of the predicted decline in real returns to capital.
Additional information:

Dieser Eintrag ist Teil der Universitätsbibliographie.

Das Dokument wird vom Publikationsserver der Universitätsbibliothek Mannheim bereitgestellt.




+ Citation Example and Export

Börsch-Supan, Axel ; Krueger, Dirk ; Ludwig, Alexander (2007) Demographic change, relative factor prices, international capital flows, and their differential effects on the welfare of generations. Open Access Working paper series / Sonderforschungsbereich 504, Rationalitätskonzepte, Entscheidungsverhalten und Ökonomische Modellierung Mannheim 07-14 [Working paper]
[img]
Preview


+ Search Authors in

+ Download Statistics

Downloads per month over past year

View more statistics



You have found an error? Please let us know about your desired correction here: E-Mail


Actions (login required)

Show item Show item