Can Inheritances Alleviate the Fiscal Burden of an Aging Population?

With pay as you go schemes in place, population aging will impose a heavy fiscal burden on young and future cohorts. However, these cohorts may also profit from larger inheritances as the number of heirs declines. The aim of this paper is to explore the compensating potential of private intergenerational transfers. A dynamic, computable general equilibrium model is employed allowing for a pay as you go scheme, various bequest motives, and an endogenous labor supply. The findings are twofold. First, the increase in future generations' inheritances is insufficient to make up for the demographic burden. Second, increasing the inheritance tax during the demographic transition may alleviate the fiscal burden of future generations by improving overall efficiency. Copyright 2003, International Monetary Fund

Capital Flows and Demographics

This paper calibrates the production functions of 176 countries to fit 2003 data and examines the capital flows that emerge, when labor forces change according to the 2007 UN population projections. It finds that demographic factors are no help in correcting today''s global imbalances; that Japan''s capital outflows have as much to do with population aging as with the yen carry-trade; and that China is key to understanding Asia''s demographic impact on the world. It also finds that Asia offers the greatest arbitrage opportunities worldwide during the demographic transition and has the greatest potential for regional financial integration among world regions. Moreover, the demographic transition is unlikely to result in an asset price meltdown and could even raise world interest rates under perfect capital mobility.Asia;Capital flows;Labor;Aging;Interest rates;capital accounts, global capital flows, capital mobility, capital outflows, exporter, international capital flows, private capital flows, capital inflows, capital exports, open capital accounts, capital income, international capital, private capital, capital stock, exporters, capital markets, export capital, capital formation, debt service, capital needs, oil exporters, stock market, capital intensity, determinants of capital flows, capital export, capital adjustment

Can inheritances Alleviate the Fiscal Burden of An Aging Population?

With pay-as-you-go schemes in place, population aging will impose a heavy fiscal burden on young and future cohorts. However, these cohorts may also profit from larger inheritances as the number of heirs declines. The aim of this paper is to explore the compensating potential of private intergenerational transfers. A dynamic, computable general equilibrium model is employed allowing for a pay-as-you-go scheme, various bequest motives, and an endogenous labor supply. The findings are twofold. First, the increase in future generations'' inheritances is insufficient to make up for the demographic burden. Second, increasing the inheritance tax during the demographic transition may alleviate the fiscal burden of future generations by improving overall efficiency.Taxation;social insurance, aging, budget constraint, welfare loss, fiscal burden, social security, tax revenue, social insurance contributions, welfare level, social insurance scheme, social insurance benefits, government expenditure, tax burden, welfare effect, dependency, fiscal policy, government budget, budget constraints, government budget constraints, welfare implications, entitlements, welfare position, aging population, income transfers, government expenditure per capita, tax base, tax evasion, fiscal consequences, tax shifting, ageing, tax rates, fiscal imbalance

A Gravity Model of Workers' Remittances

This paper creates the first dataset of bilateral remittance flows for a limited set of developing countries and estimates a gravity model for workers'' remittances. We find that most of the variation in bilateral remittance flows can be explained by a few gravity variables. The evidence on the motives to remit is mixed, but altruism may be less of a factor than commonly believed. Most strikingly, remittances do not seem to increase in the wake of a natural disaster and appear aligned with the business cycle in the home country, suggesting that remittances may not play a major role in limiting vulnerability to shocks. To encourage remittances and maximize their economic impact, policies should be directed at reducing transaction costs, promoting financial sector development, and improving the business climate.Workers remittances;Developing countries;Capital inflows;Financial sector;Economic models;remittances, remittance, remittance flows, exchange rate, bilateral remittance, workers ? remittances, remittance receipts, migrant, dual exchange rate, determinants of remittances, migration, exchange rates, dual exchange rates, remittance data, capital flows, exchange arrangements, remittance flow, foreign exchange, amount of remittances, inward remittances, migrant workers ? remittances, remittance inflows, total amount of remittances, migrants ? remittances, exchange restrictions, volume of remittances, exchange rate appreciation, effect of remittances, multiple exchange rates, current accounts, flow of remittances, exchange policy, variation in remittances, real exchange rate, variation in remittance, currency unions, recipients of remittances, emigrant remittances, importance of remittances, economic implications of remittances, foreign exchange policy, diaspora, real exchange rate appreciation, outward remittances, bilateral remittance data, exchange rate policy

Are workers' remittances a hedge against macroeconomic shocks? The case of Sri Lanka

This paper estimates a vector error correction model for Sri Lanka in order to determine the response of remittance receipts to macroeconomic shocks. This is the first attempt of its kind in the literature. The authors found that remittance receipts are pro-cyclical and decline when the country’s currency weakens, undermining their usefulness as a shock absorber. On the other hand, remittances increase in response to oil-price shocks, reflecting the fact that most overseas Sri Lankan are employed in the Persian Gulf States. The pro-cyclicality of remittances calls into question the notion that remittances are largely motivated by altruism.Workers' remittances, cyclicality, macroeconomic shock, vector error correction model

Determinants of Bilateral Remittance Flows

This paper explores the determinants of workers remittances using a novel dataset of bilateral remittance flows. The paper finds that some of the variables commonly used in gravity equations are very powerful in explaining remittance flows. The evidence on the motives to remit is mixed, but altruism may be less of factor than commonly believed. Most strikingly, remittances do not seem to increase in the wake of a natural disaster and appear aligned with the business cycle in the home country, suggesting that remittances may not play a major role in limiting vulnerability to shocks. To encourage remittances and maximize their economic impact, policies should be directed at reducing transaction costs, promoting financial sector development, and improving the business climate.

Are Workers' Remittances a Hedge Against Macroeconomic Shocks? the Case of Sri Lanka

We estimate a vector error correction (VEC) model for Sri Lanka to determine the response of remittance receipts to macroeconomic shocks. This is the first attempt of its kind in the literature. We find that remittance receipts are procyclical and decline when the island''s currency weakens, undermining their usefulness as shock absorber. On the other hand, remittances increase in response to oil price shocks, reflecting the fact that most overseas. Sri Lankan are employed in the Gulf states. The procyclicality of remittances calls into question the notion that remittances are largely motivated by altruism.Workers remittances;Economic conditions;Economic models;remittances, remittance, remittance receipts, cointegration, workers ? remittances, inward remittances, statistic, correlation, remittance flows, capital flows, correlations, statistics, time series, equation, migrant, determinants of remittances, standard deviation, additional regressor, migrant workers ? remittances, global remittance, financial statistics, migrants ? remittances, standard errors, flows of remittances, descriptive statistics, recipients of remittances, annual remittance, emigrant remittances, global remittances, covariance, remittance inflows, surveys, remittance data, increase in remittances, bilateral remittance