Edited by Patrick Artus, André Cartapanis and Florence Legros
Chapter 3: Pensions and Savings in a Monetary Union: An Analysis of Capital Flows
3. Pensions and savings in a monetary union: an analysis of capital ﬂows Alain Jousten and Florence Legros1 INTRODUCTION Most developed countries are undergoing a fundamental demographic transition due to the concurrent tendencies towards lower fertility rates and higher life expectancy. Both the reasons for and the consequences of this ageing process are numerous, but it will no doubt have a major impact on the way our societies are organized, in economic, social and political terms. While the economic consequences of a demographic ageing process are rather well understood in a closed-economy setting, this clearly does not hold true for more general frameworks characterized by open borders allowing for mobility of resources between countries. The previous literature on the impact of demographic ageing in an openeconomy framework has often focused on the case of diﬀerent countries facing ageing processes at diﬀerent times and with diﬀerent intensities. The framework chosen is often one of perfect capital and/or labour mobility between the zones. This is the case for Börsch-Supan et al. (2001), Artus (2001) and the work of the INGENUE team (2001). Artus (2001) for example presents a theoretical treatment of the special case where the two regions have diametrically opposed demographic cycles. A common feature of the literature is that it heavily relies on overlapping generations models in which the world is divided into demographic zones. The international capital ﬂows are substantial between zones, inducing a huge modiﬁcation in the allocation of property rights across individuals...
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