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INGENUE |
| Michel Aglietta |
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| Vladimir Borgy |
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| Benjamin Carton |
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| Xavier Chojnicki |
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How Will Demographic Change Affect
the Global Economy? in World Economic Outlook :
The Global Demographic Transition IMF, September 2004
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Macroeconomic Consequences of Pension Reforms in Europe: An Investigation with the INGENUE World Model (2001)
Our Future Pensions and Globalisation: An Exploration of the Issue Using the INGENUE Model (2001) |
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| The INGENUE model has been developed in order to analyse in a unified framework the stakes of the asynchronous ageing process in the different world regions and of the long-run catching-up process of the developing countries. It focuses on the long term growth perspectives, on the saving and investment dynamic of the different regions as well as on the evolution of the world interest rate. The second version of the model (that notably integrates some improvements concerning the geographical splitting, the production sector and the capital market functioning) is currently in use. INGENUE is an overlapping-generations general equilibrium model describing a world divided into ten regions on the basis of demographic and socio-economic criteria: North America (including Australia and New Zealand), Western Europe, Japan, Eastern Europe, Russian world, China World, Indian world, Latin America and Africa. Each region is made up of three agents: households, firms and the public sector. |
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| Households are characterised by their age (21 generations) that determines their wealth, their labour endowment and their life expectancy. Households, at the beginning of their adult life, choose their consumption/saving profile with the objective of maximising their inter-temporal utility function. Adult households have perfect expectations. The expected utility of each household depends on the consumption profile weighted by the uncertain survival probability. Three main variables determine the national saving: (i) the population structure, (ii) the productivity and population growth rate and (iii) the weight of the PAYG pension system. |
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| The labour market equilibrium is guaranteed in each region by the flexibility of the real wage rates which equalise the (exogenous) labour supply, determined by the demographic evolution and the legal retirement age, and the (endogenous) labour demand, depending on the productivity of local labour. The stylised production bloc allows to include the variation in the exchange rates. The national production of intermediate goods depends on the combination of local labour and productive capital. The intermediate good produced by each region is partly exported to constitute a world intermediate good. Finally, the final domestic good combines the domestic and world intermediate good. Technical progress is exogenous and raises the total factor productivity in North America. The productivity growth rates in the other countries depend on the assumptions concerning their progressive catch-up with the US. |
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| International capital markets are imperfect given the hypothesis that capital movements don’t allow to equalise marginal capital return in the different regions. Indeed, a net debtor region towards the rest of the world has to pay a risk premium proportional to its financial market exposure. Consequently, the real domestic interest rate is different to the world real interest rate. |
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| Lastly, the public sector behaviour in each region consists in respecting the equilibrium of the PAYG superannuation pension fund in each period. Each regional system is characterised by two institutional parameters: the legal retirement age and the replacement ratio. Contribution rates vary in each period so as to balance the fund. |
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| Several simulations of the model have been realised in particular concerning the European pension financing, the technological catching-up in Asia and Eastern Europe as well as on the demographic uncertainty. An explicit and detail integration of migration flows is a work in progress. |
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