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The Role of Immigration in Sustaining the Social Security System: A Political Economy Approach

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  • Edith Sand
  • Assaf Razin

Abstract

In the political debate people express the idea that immigrants are good because they can help pay for the old. The paper explores this idea in a dynamic political-economy setup. We characterize sub-game perfect Markov equilibria where immigration policy and pay-as-you-go (PAYG) social security system are jointly determined through a majority voting process. The main feature of the model is that immigrants are desirable for the sustainability of the social security system, because the political system is able to manipulate the ratio of old to young and thereby the coalition which supports future high social security benefits. We demonstrate that the older is the native born population the more likely is that the immigration policy is liberalized; which in turn has a positive effect on the sustainability of the social security system.

Suggested Citation

  • Edith Sand & Assaf Razin, 2007. "The Role of Immigration in Sustaining the Social Security System: A Political Economy Approach," CESifo Working Paper Series 1979, CESifo.
    • Handle: RePEc:ces:ceswps:_1979
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    References listed on IDEAS

    as
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Social security and immigration policy cycles
      by Economic Logician in Economic Logic on 2008-10-23 17:32:00

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    Cited by:

    1. Tim Krieger, 2014. "Public Pensions and Immigration," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 12(2), pages 10-15, 07.
    2. Calahorrano, Lena & an de Meulen, Philipp, 2011. "Demographics and Factor Flows – A Political Economy Approach," Ruhr Economic Papers 299, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    3. Razin, Assaf & Sand, Edith, 2009. "Migration-Regime Liberalization and Social Security: Political-Economy Effect," CEPR Discussion Papers 7310, C.E.P.R. Discussion Papers.
    4. Hugo Benítez-Silva & Eva Cárceles-Poveda & Selçuk Eren, 2011. "Effects of Legal and Unauthorized Immigration on the U.S. Social Security System," Working Papers wp250, University of Michigan, Michigan Retirement Research Center.
    5. Russo, Giuseppe & Salsano, Francesco, 2019. "Electoral systems and immigration," European Journal of Political Economy, Elsevier, vol. 60(C).
    6. Jakubiak Igor, 2017. "Migration and Welfare Systems – State of the Art and Research Challenges," Central European Economic Journal, Sciendo, vol. 1(48), pages 51-70, November.
    7. Amegashie, J. Atsu & Ouattara, Bazoumanna & Strobl, Eric, 2007. "Moral Hazard and the Composition of Transfers: Theory with an Application to Foreign Aid," MPRA Paper 3158, University Library of Munich, Germany, revised 06 May 2007.
    8. repec:zbw:rwirep:0299 is not listed on IDEAS
    9. Tim Krieger, 2014. "Public Pensions and Immigration," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 12(02), pages 10-15, July.
    10. Zaiceva, A. & Zimmermann, K.F., 2016. "Migration and the Demographic Shift," Handbook of the Economics of Population Aging, in: Piggott, John & Woodland, Alan (ed.), Handbook of the Economics of Population Aging, edition 1, volume 1, chapter 0, pages 119-177, Elsevier.
    11. Lena Calahorrano & Oliver Lorz, 2011. "Aging, Factor Returns, and Immigration Policy," Scottish Journal of Political Economy, Scottish Economic Society, vol. 58(5), pages 589-606, November.
    12. Martin Gonzalez-Eiras, 2011. "Social security as Markov equilibrium in OLG models: a note," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 14(3), pages 549-552, July.
    13. repec:ces:ifodic:v:12:y:2014:i:2:p:19116205 is not listed on IDEAS
    14. Lena Calahorrano & Philipp an de Meulen, 2011. "Demographics and Factor Flows – A Political Economy Approach," Ruhr Economic Papers 0299, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    15. Lena Calahorrano, 2011. "Population Aging and Individual Attitudes toward Immigration: Disentangling Age, Cohort and Time Effects," SOEPpapers on Multidisciplinary Panel Data Research 389, DIW Berlin, The German Socio-Economic Panel (SOEP).
    16. Florencia Amábile & Rómulo A. Chumacero, 2023. "Should I stay or should I go?: the economic incentives of intergenerational taxes and transfers in Uruguay," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 30(2), pages 493-524, April.

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    JEL classification:

    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • P1 - Political Economy and Comparative Economic Systems - - Capitalist Economies

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