Demographics and Factor Flows – A Political Economy Approach
Ruhr Economic Papers No. 299
30 Pages Posted: 8 Dec 2011
Date Written: December 1, 2011
Abstract
We investigate the effect of population aging on international factor flows in a political-economy framework. Political barriers to immigration in developed countries and insecure property rights in developing countries impede factor flows. Taking into account different generations’ conflicting attitudes towards immigration and expropriation, we explore how these policy barriers interact. We find that incentives to expropriate increase as more emigration from the developing country takes place. Meanwhile, the industrialized country admits less immigrants as less capital is allocated to the developing country. Furthermore, the effects of population aging on international factor flows are considerably underestimated if one does not take into consideration the interactions between immigration and expropriation policies.
Keywords: demographic change, political economy, migration, foreign direct investment
JEL Classification: D78, F21, F22, J10
Suggested Citation: Suggested Citation
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