International trade with pensions and demographic shocks

Abstract

The central question of this paper is how international trade and specialization are affected by different designs of pension schemes and asymmetric demographic changes. In a model with two goods, two countries and two production factors, we find that countries with a relatively large unfunded pension scheme will specialize in the production of labour intensive goods. If these countries are hit by a negative demographic shock, this specialization will intensify in the long run. Eventually, these countries may even completely specialize in the production of those goods. The effects spill over to other countries, which will move away from complete specialization in capital intensive goods as the relative size of their labour intensive goods sector will also increase.JEL Classification: E27, F11, F16, H55, J11.

Postponing Retirement and Social Security in a Two-Sector Model

“…7 There are a few papers analyzing a change in the mandatory retirement age. Zhang and Zhang (2005) address the effect of this on the accumulation of human capital (in their paper 5 See Sen (2016) and Fedotenkov et al (2019), for a sample of papers of two sector models that discuss social security. 6 A reform involving the cutting of the payroll tax has the opposite effect-saving increases and so does the demand for the investment good.…”