IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/56765.html
   My bibliography  Save this paper

Modeling an Immigration Shock

Author

Listed:
  • Boldrin, Michele
  • Montes, Ana

Abstract

In this paper, we model an overlapping generation economy affected by an unexpected immigration shock and determine how households would insure themselves against "immigration risks" efficiently. We use the model to study the impact of immigration on (i) the welfare of various generations, (ii) the distributions of income among factors of production, and (iii) the optimal design of the intergenerational welfare state. In particular, we construct a system of public education and public pensions that mimics efficient complete market allocation. We also show the impact of immigration shocks in a small open economy. In this case, our model suggests that the external capital flows can act as substitutes for the missing private insurance markets. Our analysis delivers a set of predictions that we find useful for understanding certain aspects of the Spanish experience during 1996 and 2007.

Suggested Citation

  • Boldrin, Michele & Montes, Ana, 2013. "Modeling an Immigration Shock," MPRA Paper 56765, University Library of Munich, Germany, revised 20 Jun 2014.
    • Handle: RePEc:pra:mprapa:56765
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/56765/1/MPRA_paper_56765.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Timothy J. Hatton & Massimiliano Tani, 2005. "Immigration and Inter-Regional Mobility in the UK, 1982-2000," Economic Journal, Royal Economic Society, vol. 115(507), pages 342-358, November.
    2. Lance J. Lochner & Alexander Monge-Naranjo, 2011. "The Nature of Credit Constraints and Human Capital," American Economic Review, American Economic Association, vol. 101(6), pages 2487-2529, October.
    3. Shiller, Robert J., 1999. "Social security and institutions for intergenerational, intragenerational, and international risk-sharing," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 50(1), pages 165-204, June.
    4. Gandal, Neil & Hanson, Gordon H. & Slaughter, M.J.Matthew J., 2004. "Technology, trade, and adjustment to immigration in Israel," European Economic Review, Elsevier, vol. 48(2), pages 403-428, April.
    5. Henning Bohn, 2001. "Social Security and Demographic Uncertainty: The Risk-Sharing Properties of Alternative Policies," NBER Chapters, in: Risk Aspects of Investment-Based Social Security Reform, pages 203-246, National Bureau of Economic Research, Inc.
    6. Borjas, George J., 1999. "The economic analysis of immigration," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 28, pages 1697-1760, Elsevier.
    7. repec:cdl:ucsbec:03-98 is not listed on IDEAS
    8. Dirk Krueger & Felix Kubler, 2006. "Pareto-Improving Social Security Reform when Financial Markets are Incomplete!?," American Economic Review, American Economic Association, vol. 96(3), pages 737-755, June.
    9. Card, David, 2001. "Immigrant Inflows, Native Outflows, and the Local Labor Market Impacts of Higher Immigration," Journal of Labor Economics, University of Chicago Press, vol. 19(1), pages 22-64, January.
    10. David Andolfatto & Martin Gervais, 2006. "Human Capital Investment and Debt Constraints," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(1), pages 52-67, January.
    11. Patricia Cortes, 2008. "The Effect of Low-Skilled Immigration on U.S. Prices: Evidence from CPI Data," Journal of Political Economy, University of Chicago Press, vol. 116(3), pages 381-422, June.
    12. Gianmarco I.P. Ottaviano & Giovanni Peri, 2005. "Rethinking the Gains from Immigration: Theory and Evidence from the U.S," NBER Working Papers 11672, National Bureau of Economic Research, Inc.
    13. Fabio Canova & Morten Ravn, 2000. "The Macroeconomic Effects of German Unification: Real Adjustments and the Welfare State," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(3), pages 423-460, July.
    14. Sarit Cohen & Chang-Tai Hsieh, 2001. "Macroeconomic and Labor Market Impact of Russian Immigration in Israel," Working Papers 2001-11, Bar-Ilan University, Department of Economics.
    15. Michele Boldrin & Ana Montes, 2005. "The Intergenerational State Education and Pensions," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 72(3), pages 651-664.
    16. Stuart J. Wilson, 2003. "A Dynamic General Equilibrium Analysis of Migration and Capital Formation: The Case of Canada," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(2), pages 455-481, April.
    17. Mario Izquierdo & Juan Jimeno & Juan Rojas, 2010. "On the aggregate effects of immigration in Spain," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 1(4), pages 409-432, September.
    18. Sanchez-Marcos, Virginia & Sanchez-Martin, Alfonso R., 2006. "Can social security be welfare improving when there is demographic uncertainty?," Journal of Economic Dynamics and Control, Elsevier, vol. 30(9-10), pages 1615-1646.
    19. Michele Boldrin & Ana Montes, 2009. "Assessing the efficiency of public education and pensions," Journal of Population Economics, Springer;European Society for Population Economics, vol. 22(2), pages 285-309, April.
    20. repec:cdl:ucsbec:3-98 is not listed on IDEAS
    21. Cohen Goldner, Sarit & Eckstein, Zvi & Weiss, Yoram, 2012. "Immigration and Labor Market Mobility in Israel, 1990 to 2009," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262017679, April.
    22. Ángel Gavilán & Pablo Hernández de Cos & Juan F. Jimeno & Juan A. Rojas, 2011. "Fiscal policy, structural reforms and external imbalances: a quantitative evaluation for Spain," Working Papers 1107, Banco de España.
    23. Bohn, Henning, 1998. "Risk Sharing in a Stochastic Overlapping Generations Economy," University of California at Santa Barbara, Economics Working Paper Series qt9r2809f0, Department of Economics, UC Santa Barbara.
    24. Robert Myers, 1999. "Social Security," North American Actuarial Journal, Taylor & Francis Journals, vol. 3(4), pages 59-63.
    25. Eberhard, Juan, 2012. "Immigration, Human Capital and the Welfare of Natives," MPRA Paper 37844, University Library of Munich, Germany.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bohn, Henning & Lopez-Velasco, Armando R., 2019. "Immigration And Demographics: Can High Immigrant Fertility Explain Voter Support For Immigration?," Macroeconomic Dynamics, Cambridge University Press, vol. 23(5), pages 1815-1837, July.
    2. Agustín Arias & Juan Guerra-Salas, 2019. "Immigration in Emerging Countries: A Macroeconomic Perspective," Working Papers Central Bank of Chile 857, Central Bank of Chile.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Martin Barbie & Marcus Hagedorn & Ashok Kaul, 2006. "Fostering Within-Family Human-Capital Investment: An Intragenerational Insurance Perspective of Social Security," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 62(4), pages 503-529, December.
    2. Gordon H. Hanson, 2009. "The Economic Consequences of the International Migration of Labor," Annual Review of Economics, Annual Reviews, vol. 1(1), pages 179-208, May.
    3. Simonetta Longhi & Peter Nijkamp & Jacques Poot, 2009. "Regional Economic Impacts of Immigration: A Review," Tinbergen Institute Discussion Papers 09-047/3, Tinbergen Institute, revised 23 Jul 2009.
    4. repec:hum:wpaper:sfb649dp2006-066 is not listed on IDEAS
    5. Ortega, Javier & Verdugo, Gregory, 2016. "Moving Up or Down? Immigration and the Selection of Natives across Occupations and Locations," IZA Discussion Papers 10303, Institute of Labor Economics (IZA).
    6. Beetsma, R. & Romp, W., 2016. "Intergenerational Risk Sharing," 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 311-380, Elsevier.
    7. Lans Bovenberg & Harald Uhlig, 2008. "Pension Systems and the Allocation of Macroeconomic Risk," NBER Chapters, in: NBER International Seminar on Macroeconomics 2006, pages 241-344, National Bureau of Economic Research, Inc.
    8. Fusshoeller, Chantal & Balleer, Almut, 2017. "Migration and investment: a business cycle perspective," VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168125, Verein für Socialpolitik / German Economic Association.
    9. Dirk Krueger, 2006. "Public Insurance against Idiosyncratic and Aggregate Risk: The Case of Social Security and Progressive Income Taxation," CESifo Economic Studies, CESifo Group, vol. 52(4), pages 587-620, December.
    10. Ortega, J. & Verdugo, G., 2015. "The Impact of Immigration on the Local Labor Market Outcomes of Blue Collar Workers: Panel Data Evidence," Working Papers 15/07, Department of Economics, City University London.
    11. Lewis, Ethan & Peri, Giovanni, 2015. "Immigration and the Economy of Cities and Regions," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 625-685, Elsevier.
    12. Lemos, Sara & Portes, Jonathan, 2008. "New Labour? The Impact of Migration from Central and Eastern European Countries on the UK Labour Market," IZA Discussion Papers 3756, Institute of Labor Economics (IZA).
    13. Alexander Ludwig & Michael Reiter, 2010. "Sharing Demographic Risk--Who Is Afraid of the Baby Bust?," American Economic Journal: Economic Policy, American Economic Association, vol. 2(4), pages 83-118, November.
    14. Dirk Krueger & Felix Kubler, 2006. "Pareto-Improving Social Security Reform when Financial Markets are Incomplete!?," American Economic Review, American Economic Association, vol. 96(3), pages 737-755, June.
    15. Ana María Tribín-Uribe, Achyuta Adhvaryu, Cesar Anzola-Bravo & Oscar Ávila-Montealegre, Leonardo Bonilla-Mejía, Juan Carlos Castro-Fernández & Luz A. Flórez, Ánderson Grajales-Olarte, Alexander Guarín, 2020. "Migración desde Venezuela en Colombia: caracterización del fenómeno y análisis de los efectos macroeconómicos," Revista ESPE - Ensayos Sobre Política Económica, Banco de la República, issue 97, pages 1-74, October.
    16. Lin Tian & Jonathan Vogel & Gordon Hanson & Ariel Burstein, 2017. "Immigration, Occupations, and Local Labor Markets: Theory and Evidence from the U.S," 2017 Meeting Papers 79, Society for Economic Dynamics.
    17. Bodvarsson, Örn B. & Van den Berg, Hendrik F. & Lewer, Joshua J., 2008. "Measuring immigration's effects on labor demand: A reexamination of the Mariel Boatlift," Labour Economics, Elsevier, vol. 15(4), pages 560-574, August.
    18. Gabrielle Demange, 2009. "On Sustainable Pay‐as‐You‐Go Contribution Rules," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 11(4), pages 493-527, August.
    19. Hatton, Tim & Williamson, Jeffrey G., 2006. "What Determines Immigrations' Impact? Comparing Two Global Centuries," CEPR Discussion Papers 5885, C.E.P.R. Discussion Papers.
    20. Hans Fehr, 2009. "Computable Stochastic Equilibrium Models and Their Use in Pension- and Ageing Research," De Economist, Springer, vol. 157(4), pages 359-416, December.
    21. Akay, Alpaslan & Constant, Amelie & Giulietti, Corrado, 2014. "The impact of immigration on the well-being of natives," Journal of Economic Behavior & Organization, Elsevier, vol. 103(C), pages 72-92.

    More about this item

    Keywords

    social security; human capital; overlapping generations; immigration; trade deficit; risk sharing;
    All these keywords.

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:56765. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.