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


Börsch-Supan, Axel ; Ludwig, Alexander ; Winter, Joachim


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URL: https://madoc.bib.uni-mannheim.de/299
URN: urn:nbn:de:bsz:180-madoc-2991
Document Type: Working paper
Year of publication: 2003
The title of a journal, publication series: MEA Discussion Papers
Volume: 028
Place of publication: Mannheim
Publication language: English
Institution: School of Law and Economics > Sonstige - Fakultät für Rechtswissenschaft und Volkswirtschaftslehre
MADOC publication series: Veröffentlichungen des MEA (Mannheim Research Institute For the Economics of Aging) > MEA Discussion Papers
Subject: 330 Economics
Classification: JEL: H 5 J11 F21 G15 E27 ,
Subject headings (SWD): Rentenreform , Kapitalbewegung
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.

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Börsch-Supan, Axel ; Ludwig, Alexander ; Winter, Joachim (2003) Aging, pension reform, and capital flows : a multi-country simulation model. Open Access MEA Discussion Papers Mannheim 028 [Working paper]
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