Aging and International Capital Flows
Content
Throughout the world, population aging is a major challenge that will
continue well into the 21st century. While the patterns of the demographic
transition are similar in most countries, 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 international capital flows, we
employ a multi-country overlapping generations model and combine it with long-term
demographic projections for several world regions over a 50 year horizon.
Our simulations suggest that capital flows from fast-aging industrial countries
(such as Germany and Italy) to the rest of the world will be substantial. Closed-economy
models of pension reform are likely to miss quantitatively important
effects of international capital mobility.
Publication Details