Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/58644 
Year of Publication: 
2011
Series/Report no.: 
IZA Discussion Papers No. 6094
Publisher: 
Institute for the Study of Labor (IZA), Bonn
Abstract: 
This paper contributes to the already vast literature on demography-induced international capital flows by examining the role of labor market imperfections and institutions. We setup a two-country overlapping generations model with search unemployment, which we calibrate on EU15 and US data. Labor market imperfections are found to significantly increase the volume of capital flows, because of stronger employment adjustments in comparison with a competitive economy. We next exploit the model to investigate how demographic asymmetries may have contributed to unemployment and welfare changes in the recent past (1950-2010). We show that a policy reform in one country also has an impact on labor markets in other countries when capital is mobile.
Subjects: 
demographics
capital flows
overlapping generations
general equilibrium
unemployment
JEL: 
J11
F21
D91
C68
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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