Sustaining Fiscal Policy through Immigration
AbstractThis paper explores the fiscal implications of immigration to the US and argues that immigration policy should be viewed as a vital part of fiscal policy. In particular a case is made that skills and age at the time of arrival are of great importance for the cost-benefit calculation of new immigrants. Using a calibrated general equilibrium overlapping generations model, which explicitly accounts for key differences between immigrants and natives, Social Security and the demographic transition, I investigate if an immigration policy reform alone could resolve the fiscal problems associated with the ageing of the baby boom generation I find that such policies exist and are characterized by increased inflows of working-age high and medium skilled immigrants. One particular feasible policy involves admitting 1.6 million 40-44 year-old high skilled immigrants annually compared to a total of 1.1 million today. In contrast an income tax hike of 4.4% points would be required if future fiscal problems were to be solved by a once and for all tax reform. To further illuminate the fiscal impact of immigration I compute the net government gain in present value terms of admitting one additional immigrant. This figure varies considerably with age and skills and reaches a maximum of seven times GNP per capita for high skilled 40-44 year-old immigrants. In contrast new immigrants represent on average a small net gain of $7,400 or 0.3 times GNP per capita.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by University of Chicago Press in its journal Journal of Political Economy.
Volume (Year): 108 (2000)
Issue (Month): 2 (April)
Contact details of provider:
Web page: http://www.journals.uchicago.edu/JPE/
Other versions of this item:
- Storesletten, Kjetil, 1998. "Sustaining Fiscal Policy Through Immigration," Seminar Papers 664, Stockholm University, Institute for International Economic Studies.
- Kjetil Storesletten, . "Sustaining Fiscal Policy Through Immigration," Homapage Papers _005, Stockholm University, Institute for International Economic Studies.
- F22 - International Economics - - International Factor Movements and International Business - - - International Migration
- H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
- H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
- J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hurd, Michael D, 1989. "Mortality Risk and Bequests," Econometrica, Econometric Society, vol. 57(4), pages 779-813, July.
- Michael Baker & Dwayne Benjamin, 1995. "The Receipt of Transfer Payments by Immigrants to Canada," Journal of Human Resources, University of Wisconsin Press, vol. 30(4), pages 650-676.
- Rios-Rull, Jose-Victor, 1996. "Life-Cycle Economies and Aggregate Fluctuations," Review of Economic Studies, Wiley Blackwell, vol. 63(3), pages 465-89, July.
- Holger Bonin & Bernd Raffelhüschen & Jan Walliser, 2000.
"Can Immigration Alleviate the Demographic Burden?,"
FinanzArchiv: Public Finance Analysis,
Mohr Siebeck, Tübingen, vol. 57(1), pages 1-, September.
- Ather H. Akbari, 1989. "The Benefits of Immigrants to Canada: Evidence on Tax and Public Services," Canadian Public Policy, University of Toronto Press, vol. 15(4), pages 424-435, December.
- George J. Borjas, 1994. "The Economics of Immigration," Journal of Economic Literature, American Economic Association, vol. 32(4), pages 1667-1717, December.
- George J. Borjas & Bernt Bratsberg, 1994.
"Who Leaves? The Outmigration of the Foreign-Born,"
NBER Working Papers
4913, National Bureau of Economic Research, Inc.
- George J. Borjas & Lynette Hilton, 1995.
"Immigration and the Welfare State: Immigrant Participation in Means- Tested Entitlement Programs,"
NBER Working Papers
5372, National Bureau of Economic Research, Inc.
- Borjas, George J & Hilton, Lynette, 1996. "Immigration and the Welfare State: Immigrant Participation in Means-Tested Entitlement Programs," The Quarterly Journal of Economics, MIT Press, vol. 111(2), pages 575-604, May.
- Alan J. Auerbach & Laurence J. Kotlikoff & Robert P. Hagemann & Giuseppe Nicoletti, 1989. "The Economic Dynamics of an Ageing Population: The Case of Four OECD Countries," OECD Economics Department Working Papers 62, OECD Publishing.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Social security and immigration policy cycles
by Economic Logician in Economic Logic on 2008-10-23 12:32:00
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading lists or Wikipedia pages:Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Journals Division).
If references are entirely missing, you can add them using this form.