Pensions and ageing in a globalizing world. International spillover effects via trade and factor mobility
Economic globalization is usually considered as an increasing interdependence between countries due to growing mobility of goods, services, capital, labour and technologies across the countries. It is one of the most challenging phenomena in the modern world. Intensification of international trade and production factor mobility allows for more specialization, gives welfare gains and enhances the size of GDP. However, countries have also become more sensitive to developments abroad. For example, financial difficulties in a few countries of the European Union (EU) have a significant influence on the other EU countries and the rest of the world. Another important recent phenomenon, which is faced by the western world and other countries, such as Japan, Russia and the US, is population ageing. Population ageing implies fewer young working people relative to the number of retired. It jeopardizes the sustainability of pension schemes and creates incentives for pension reform. Both phenomena are studied extensively separately, but not often a connection of these two areas is considered. There are still many open questions on the intersection of ageing and globalization and several of them are studied in this thesis.
Broadly speaking, all the chapters in this thesis study how changes in demographics or pensions in one country affect other countries. International spillovers, are understood as the effects caused by developments in one country (for example, demographic shocks or policy changes) on economic variables, and in particular welfare, in another country. They are the focus of this thesis. Spillovers of pension reform are considered in different settings, using different transmission mechanisms: mobile production factors (not only capital, but also labour) and international trade of goods and services. Differences in models and transmission mechanisms give a possibility to consider international spillovers of pension reform from different angles and contribute to a better understanding of this phenomenon. These settings are also used to study international spillovers of a temporary decrease in the fertility rate. Furthermore, by considering mobile production factors and international trade one can study the effects of frictions in pension benefits adjustment in a response to an economic crisis, i.e., how delays in one country to adjust pension benefits after an economic crisis affect the other countries in an economic union.