Rising fertility and declining mortality have had a profound impact on Asian savings, investment, and foreign capital dependency since Coale and Hoover wrote in 1958. This article argues that much of the impressive rise in Asian savings rates since the 1960s can be explained by the equally impressive decline in youth dependency burdens. Wherever the youth dependency burden has fallen dramatically, Asian countries have relinquished their reliance on foreign capital. Aging will not diminish Japan’s capacity to export capital in the next century, but little of it will go to the rest of Asia; rather, the countries in the rest of Asia are expected to become net capital exporters. These conclusions emerge from a model that extends the conventional focus of the dependency rate literature on savings to investment and net capital flows.
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