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The welfare state and migration: A dynamic analysis of political coalitions

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  • Suwankiri, Benjarong
  • Razin, Assaf
  • Sadka, Efraim

Abstract

We develop a dynamic political–economic theory of welfare state and immigration policies, featuring three distinct voting groups: skilled workers, unskilled workers, and old retirees. The essence of inter- and intra-generational redistribution of a typical welfare system is captured with a proportional tax on labor income to finance a transfer in a balanced-budget manner. We provide an analytical characterization of political–economic equilibrium policy rules consisting of the tax rate, the skill composition of migrants, and the total number of migrants. When none of these groups enjoy a majority (50 percent of the voters or more), political coalitions will form. With overlapping generations and policy-determined influx of immigrants, the formation of the political coalitions changes over time. These future changes are taken into account when policies are shaped.

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  • Suwankiri, Benjarong & Razin, Assaf & Sadka, Efraim, 2016. "The welfare state and migration: A dynamic analysis of political coalitions," Research in Economics, Elsevier, vol. 70(1), pages 122-142.
    • Handle: RePEc:eee:reecon:v:70:y:2016:i:1:p:122-142
    DOI: 10.1016/j.rie.2015.07.001
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    Cited by:

    1. Łukasz Byra, 2023. "Two possible reasons behind the reluctance of low-skilled workers to migrate to generous welfare states," Working Papers 2023-24, Faculty of Economic Sciences, University of Warsaw.
    2. Hur, Jinwook, 2022. "Political Economy of Immigration and Fiscal Sustainability," KDI Journal of Economic Policy, Korea Development Institute (KDI), vol. 44(1), pages 1-47.
    3. Dotti, Valerio, 2020. "No Country for Young People? The Rise of Anti-immigration Populism in Ageing Societies," MPRA Paper 100226, University Library of Munich, Germany.
    4. Germán Gieczewski, 2021. "Policy Persistence and Drift in Organizations," Econometrica, Econometric Society, vol. 89(1), pages 251-279, January.
    5. Valerio Dotti, 2022. "No Country for Young People? The Rise of Anti-Immigration Politics in Ageing Societies," Working Papers 2022:14, Department of Economics, University of Venice "Ca' Foscari".
    6. Christina Felfe de Ormeño & Helmut Rainer, 2020. "Intended and Unintended Consequences of Birthright Citizenship," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 21(04), pages 14-18, November.
    7. Etro, Federico, 2015. "Research in economics and political economy," Research in Economics, Elsevier, vol. 69(3), pages 261-264.
    8. Carmen Beviá & Luis Corchón & Antonio Romero-Medina, 2017. "Relinquishing power, exploitation and political unemployment in democratic organizations," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 49(3), pages 735-753, December.

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    More about this item

    Keywords

    Generosity of welfare state; Pay as you go; Political coalitions; Strategic voting; Skill composition of migration; Markov-perfect political equilibrium;
    All these keywords.

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • H0 - Public Economics - - General

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