International Trade with Pensions and Demographic Shocks

24 Pages Posted: 1 Sep 2012

See all articles by Igor Fedotenkov

Igor Fedotenkov

Tilburg University

A. C. Meijdam

Tilburg University - Center for Economic Research (CentER); Tilburg University - Department of Economics

Bas van Groezen

Tilburg University; Tilburg University - Center for Economic Research (CentER)

Date Written: May 1, 2012

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, which is contrary to the prediction of the classical Heckscher-Ohlin-Samuelson model. 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.

Keywords: Pensions, international spillovers, decrease in fertility, trade, specialization

JEL Classification: E27, F16, H55, J19

Suggested Citation

Fedotenkov, Igor and Meijdam, A.C. (Lex) and van Groezen, Bas J.A.M., International Trade with Pensions and Demographic Shocks (May 1, 2012). Netspar Discussion Paper No. 05/2012-027, Available at SSRN: https://ssrn.com/abstract=2138815 or http://dx.doi.org/10.2139/ssrn.2138815

Igor Fedotenkov (Contact Author)

Tilburg University ( email )

P.O. Box 90153
Tilburg, DC Noord-Brabant 5000 LE
Netherlands

A.C. (Lex) Meijdam

Tilburg University - Center for Economic Research (CentER) ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 23 85 (Phone)
+31 13 466 30 42 (Fax)

Tilburg University - Department of Economics

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Bas J.A.M. Van Groezen

Tilburg University ( email )

P.O. Box 90153
Tilburg, DC Noord-Brabant 5000 LE
Netherlands

Tilburg University - Center for Economic Research (CentER) ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

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