Investment to serve future consumption needs : trade theory applied to demographic challenges

Abstract

One-good-economy neoclassical models predict that the non-synchronized aging between developing and developed economies can cause interaction between them leading to a Pareto improvement, e.g. Holzmann (2000). Interaction can be released through pension reforms introducing foreign funding. As shown in this paper, these possible gains from pension reform might not occur when more than one sector of production is considered. The equilibrium may be characterized by no interaction between developed and developing regions.