Ruhr Economic Papers

Ruhr Economic Papers #299

Demographics and Factor Flows – A Political Economy Approach

by Lena Calahorrano and Philipp an de Meulen

RWI, 12/2011, 28 S./p., 8 Euro, ISBN 978-3-86788-344-3

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Abstract

We investigate the effect of population aging on international factor flows in a political-economy framework. Political barriers to immigration in developed countries and insecure property rights in developing countries impede factor flows. Taking into account different generations’ conflicting attitudes towards immigration and expropriation, we explore how these policy barriers interact. We find that incentives to expropriate increase as more emigration from the developing country takes place. Meanwhile, the industrialized country admits less immigrants as less capital is allocated to the developing country. Furthermore, the effects of population aging on international factor flows are considerably underestimated if one does not take into consideration the interactions between immigration and expropriation policies.

JEL-Classification: D78, F21, F22, J10

Keywords: Demographic change; political economy; migration; foreign direct investment

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