On the Consequences of Demographic Change for Rates of Returns to Capital, and the Distribution of Wealth and Welfare

In the industrialized world the population is aging over time, reducing the fraction of the population in working age. Consequently labor is expected to be scarce, relative to capital, with an ensuing decline in the real return on capital. This paper uses demographic projections together with a large scale multi-country Overlapping Generations Model with uninsurable idiosyncratic uncertainty to quantify the distributional and welfare consequences of these changes in factor prices induced by the demographic transition. In our model capital can freely flow between different regions in the OECD (the U.S., the EU and the rest of the OECD). Thus international capital flows may in principle mitigate the decline in rates of returns one would expect in the U.S. if it were a closed economy. We find exactly the opposite. In the U.S. as an open economy, rates of return are predicted to decline by 86 basis points between 2005 and 2080. If the U.S. were a closed economy, this decline would amount to only 78 basis points. This result is due to the fact that other regions in the OECD will age even more rapidly; therefore the U.S. is âimportingâ the more severe aging problem from these regions, especially Europe. A similar conclusion is reached if we let capital flow freely between the OECD and the rest of the world (ROW). While ROW currently has a younger population structure, it is predicted to age even more severely in the next decades, giving rise to an even more pronounced decline in world rates of return to capital. In order to evaluate the welfare consequences of the demographic transition we ask the following hypothetical question: suppose a household economically born in 2005 would live through the economic transition with changing factor prices induced by the demographic change (but keeping her own survival probabilities constant at their 2005 values), how would its welfare have changed, relative to a situation without a demographic transition? We find that households experience significant welfare losses due to the demographic transition, in the order of 2 −5% of consumption, depending on their initial productivity level and the design of the pension system. These losses are mainly due to the fact that lower future returns to capital make it harder for households to save for retirement. On the other hand, if the OECD suddenly opens up to ROW in 2005 and ROW has higher returns to capital before the world capital market integration, then these losses are reduced to 1.5 − 2.5%.

Evaluating probabilistic forecasts with scoringRules

Probabilistic forecasts in the form of probability distributions over future events have become popular in several fields including meteorology, hydrology, economics, and demography. In typical applications, many alternative statistical models and data sources can be used to produce probabilistic forecasts. Hence, evaluating and selecting among competing methods is an important task. The scoringRules package for R provides functionality for comparative evaluation of probabilistic models based on proper scoring rules, covering a wide range of situations in applied work. This paper discusses implementation and usage details, presents case studies from meteorology and economics, and points to the relevant background literature

Impact-Generated Dust Clouds Surrounding the Galilean Moons

Tenuous dust clouds of Jupiter's Galilean moons Io, Europa, Ganymede and Callisto have been detected with the in-situ dust detector on board the Galileo spacecraft. The majority of the dust particles have been sensed at altitudes below five radii of these lunar-sized satellites. We identify the particles in the dust clouds surrounding the moons by their impact direction, impact velocity, and mass distribution. Average particle sizes are 0.5 to $\rm 1 \mu m$, just above the detector threshold, indicating a size distribution with decreasing numbers towards bigger particles. Our results imply that the particles have been kicked up by hypervelocity impacts of micrometeoroids onto the satellites' surfaces. The measured radial dust density profiles are consistent with predictions by dynamical modeling for satellite ejecta produced by interplanetary impactors (Krivov et al., PSS, 2003, 51, 251--269), assuming yield, mass and velocity distributions of the ejecta from laboratory measurements. The dust clouds of the three outer Galilean moons have very similar properties and are in good agreement with the model predictions for solid ice-silicate surfaces. The dust density in the vicinity of Io, however, is more than an order of magnitude lower than expected from theory. This may be due to a softer, fluffier surface of Io (volcanic deposits) as compared to the other moons. The log-log slope of the dust number density in the clouds vs. distance from the satellite center ranges between --1.6 and --2.8. Appreciable variations of number densities obtained from individual flybys with varying geometry, especially at Callisto, might be indicative of leading-trailing asymmetries of the clouds due to the motion of the moons with respect to the field of impactors.Comment: Icarus, in press, 46 pages, 16 figures, 5 table

Small distance expansion for radiative heat transfer between curved objects

We develop a small distance expansion for the radiative heat transfer between gently curved objects, in terms of the ratio of distance to radius of curvature. A gradient expansion allows us to go beyond the lowest order proximity transfer approximation. The range of validity of such expansion depends on temperature as well as material properties. Generally, the expansion converges faster for the derivative of the transfer than for the transfer itself, which we use by introducing a near-field adjusted plot. For the case of a sphere and a plate, the logarithmic correction to the leading term has a very small prefactor for all materials investigated.Comment: 5 pages, 3 figure

Optical Absorption Measurements on Crystalline Silicon at 1550nm

Crystalline silicon is currently being discussed as test-mass material for future generations of gravitational wave detectors that will operate at cryogenic temperatures. We present optical absorption measurements on a large-dimension sample of crystalline silicon at a wavelength of 1550nm at room temperature. The absorption was measured in a monolithic cavity setup using the photo-thermal self-phase modulation technique. The result for the absorption coefficient of this float-zone sample with a specific resistivity of 11kOhm cm was measured to be \alpha_A=(264 +/- 39)ppm/cm.Comment: 11 pages, 6 figures, 1 tabl

On the Consequences of Demographic Change for Rates of Returns to Capital, and the Distribution of Wealth and Welfare

In the industrialized world the population is aging over time, reducing the fraction of the population in working age. Consequently labor is expected to be scarce, relative to capital, with an ensuing decline in the real return on capital. This paper uses demographic projections together with a large scale multi-country Overlapping Generations Model with uninsurable idiosyncratic uncertainty to quantify the distributional and welfare consequences of these changes in factor prices induced by the demographic transition. In our model capital can freely flow between different regions in the OECD (the U.S., the EU and the rest of the OECD). Thus international capital flows may in principle mitigate the decline in rates of returns one would expect in the U.S. if it were a closed economy. We find exactly the opposite. In the U.S. as an open economy, rates of return are predicted to decline by 86 basis points between 2005 and 2080. If the U.S. were a closed economy, this decline would amount to only 78 basis points. This result is due to the fact that other regions in the OECD will age even more rapidly; therefore the U.S. is âimportingâ the more severe aging problem from these regions, especially Europe. A similar conclusion is reached if we let capital flow freely between the OECD and the rest of the world (ROW). While ROW currently has a younger population structure, it is predicted to age even more severely in the next decades, giving rise to an even more pronounced decline in world rates of return to capital. In order to evaluate the welfare consequences of the demographic transition we ask the following hypothetical question: suppose a household economically born in 2005 would live through the economic transition with changing factor prices induced by the demographic change (but keeping her own survival probabilities constant at their 2005 values), how would its welfare have changed, relative to a situation without a demographic transition? We find that households experience significant welfare losses due to the demographic transition, in the order of 2 −5% of consumption, depending on their initial productivity level and the design of the pension system. These losses are mainly due to the fact that lower future returns to capital make it harder for households to save for retirement. On the other hand, if the OECD suddenly opens up to ROW in 2005 and ROW has higher returns to capital before the world capital market integration, then these losses are reduced to 1.5 - 2.5%.

Birefringence Measurements on Crystalline Silicon

Crystalline silicon has been proposed as a new test mass material in third generation gravitational wave detectors such as the Einstein Telescope (ET). Birefringence can reduce the interferometric contrast and can produce dynamical disturbances in interferometers. In this work we use the method of polarisation-dependent resonance frequency analysis of Fabry-Perot-cavities containing silicon as a birefringent medium. Our measurements show a birefringence of silicon along the (111) axis of the order of $\Delta\, n \approx 10^{-7}$ at a laser wavelength of 1550nm and room temperature. A model is presented that explains the results of different settings of our measurements as a superposition of elastic strains caused by external stresses in the sample and plastic strains possibly generated during the production process. An application of our theory on the proposed ET test mass geometry suggests no critical effect on birefringence due to elastic strains.Comment: 19 pages, 6 figures, 2 table