Working Paper: NBER ID: w10781
Authors: Robert Dekle
Abstract: We project the impact of demographic change on Japanese capital flows by simulating the impact of population aging on Japanese saving and investment rates. As aging depresses saving rates, in our baseline projections, we show that by 2015, foreign capital inflows will comprise about 15 percent of Japanese output. A distinguishing feature of this paper is that we compare the capital flows that occur without immigration to the capital inflows that would occur with immigration of 400,000 people annually. With the larger labor force from immigration and the larger induced capital accumulation, output will be 22 percent higher by 2020, and 50 percent higher by 2040. The higher output means that less capital needs to be imported; by 2015, Japan will be importing only 8 percent of its output.
Keywords: No keywords provided
JEL Codes: F2; F3; F4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Aging population in Japan (J11) | Decline in saving rates (D14) |
| Aging population in Japan (J11) | Decline in investment rates (F21) |
| Decline in saving rates (D14) | Increased reliance on foreign capital (F65) |
| Decline in investment rates (F21) | Increased reliance on foreign capital (F65) |
| Aging population in Japan (J11) | Current account deficits (F32) |
| Immigration (F22) | Increase in output (E23) |
| Immigration (F22) | Reduction in need for capital imports (F21) |
| Aging population in Japan (J11) | Foreign capital inflows constitute 15% of output (F21) |