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The Long-Term Economic Impact of Reducing Migration in the UK

Author

Listed:
  • Katerina Lisenkova
  • Marcel Mérette
  • Miguel Sánchez-Martínez

Abstract

This paper uses an OLG-CGE model for the UK to illustrate the long-term effect of migration on the economy. We use the current Conservative Party migration target to reduce net migration “from hundreds of thousands to tens of thousands†as an illustration. Achieving this target would require reducing recent net migration numbers by a factor of about 2. We undertake a simulation exercise to compare a baseline scenario, which incorporates the principal 2010-based ONS population projections, with a lower migration scenario, which assumes that net migration is reduced by around 50 per cent. The results show that such a significant reduction in net migration has strong negative effects on the economy. By 2060 the levels of both GDP and GDP per person fall by 11.0 per cent and 2.7 per cent respectively. Moreover, this policy has a significant impact on public finances. To keep the government budget balanced, the effective labour income tax rate has to be increased by 2.2 percentage points in the lower migration scenario.

Suggested Citation

  • Katerina Lisenkova & Marcel Mérette & Miguel Sánchez-Martínez, 2014. "The Long-Term Economic Impact of Reducing Migration in the UK," National Institute Economic Review, National Institute of Economic and Social Research, vol. 229(1), pages 22-30, August.
    • Handle: RePEc:sae:niesru:v:229:y:2014:i:1:p:r22-r30
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    More about this item

    Keywords

    UK; migration; OLG; population ageing;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

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