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Immigration, Fiscal Policy, and Welfare in an Aging Population

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  • Akin Serife Nuray

    (University of Miami)

Abstract

I evaluate the welfare effects of exogenous changes in immigration policy by constructing a heterogeneous agent overlapping generations model with agents differing in age, origin, and skills. Calibrating the model to Germany, I match the main features of the social security and tax systems, and account for differences in inter-generational transmission of skills and fertility between immigrants and natives. I find that a prohibition on immigration reduces welfare for the natives, whereas a policy that allows an annual inflow equal to 0.4 percent of the population increases welfare for all agents on the new balanced growth path. Interactions between the social security system, taxes, and equilibrium prices are crucial: immigration reduces wages, but raises the rental rate of capital and the number of workers per retiree, allowing for higher pension benefits and a lower consumption tax rate.

Suggested Citation

  • Akin Serife Nuray, 2012. "Immigration, Fiscal Policy, and Welfare in an Aging Population," The B.E. Journal of Macroeconomics, De Gruyter, vol. 12(1), pages 1-45, July.
    • Handle: RePEc:bpj:bejmac:v:12:y:2012:i:1:n:23
    DOI: 10.1515/1935-1690.2352
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    1. Şerife Genç İleri, 2019. "Selective immigration policy and its impacts on Canada's native‐born population: A general equilibrium analysis," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 52(3), pages 954-992, August.
    2. Gurgen Aslanyan, 2012. "Immigration Control & Long-Run Population Welfare," CERGE-EI Working Papers wp453, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    3. Vikhrov Dmytro, 2013. "Welfare Effects of Labor Migration," CERGE-EI Working Papers wp491, The Center for Economic Research and Graduate Education - Economics Institute, Prague.

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