The spillover effects of population aging, international capital flows, and welfare

This paper considers how a rise in old-age survival probability in a country with a higher old-age dependency ratio (the home country) influences the welfare of a country with a lower old-age dependency ratio (the foreign country). In a dynamically efficient steady-state equilibrium, we show that the old-age survival probability in the home country, when relatively low (high), has a positive (negative) effect on the welfare of the foreign country. We also show that the reform of a social security program in the home country may improve not only domestic welfare but also the welfare of the foreign country.