A Simulation Model of Global Pension Investment

Abstract

Maintaining prosperity in an ageing society is a rapidly growing concern in almost all OECD countries and was one of the topics discussed in depth at the 1998 Meeting of the OECD Council at Ministerial level.The ageing of populations, and policy reactions to it, will have important implications for the financial interdependence between the OECD area and the developing world as OECD region savers seek to maximise their returns outside OECD countries.The authors of this study, Landis MacKellar of the International Institute for Applied Systems Analysis (IIASA) and Helmut Reisen of the OECD Development Centre, have developed an economic-demographic model to simulate the nature of these implications for the 21st century.Their model complements the OECD Minilink model created to examine the macroeconomic implications of ageing by adding policy-relevant demographic, sectoral and distributional detail.The results of the simulations point out how, and to what extent, international financial integration could assist in softening the impacts of population ageing.The authors conclude that the investment of pension assets into emerging markets can attenuate, but not reverse, the decline in capital returns that will result from population ageing.Moreover, the study shows that significant distributional effects will arise from the interaction of financial globalisation and population ageing: while globalisation is likely to benefit funded pensions, it might reduce pensions from unfunded schemes.This study was carried out within the framework of the Development Centre's research programme on Macroeconomic Interdependence and Capital Flows and was also included as a contribution to a larger, OECD-wide report, Maintaining Prosperity in an Ageing Society (1998).The findings will be of particular interest to policy makers in finance, social affairs and development ministries as well as people in the financial industry and researchers carrying out applied economic research.

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 16 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.