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Estimating The Impact Of Immigrants On The Host Country Social Security System When Return Migration Is An Endogenous Choice

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  • Murat G. Kirdar

Abstract

In this paper, I examine the impact of immigrants on the social security system in Germany when return migration is an endogenous choice. For this purpose, I develop a dynamic stochastic model of joint return migration and saving decisions that accounts for uncertainty in future employment and income and estimate this model using a longitudinal dataset on immigrants from five different source countries. I find that immigrants make positive net contributions to both the pension and unemployment insurance systems in Germany regardless of their country of origin and age-at-entry. Moreover, the magnitudes of the net contributions are remarkable for certain groups. Return migration plays a critical role in generating these positive net contributions. In a counterfactual, I examine how much exogenous modeling of the return decision, which has been the practice of the literature so far, changes immigrants’ net contributions. Such a restriction causes a serious misestimation of net contributions. I also examine the impact of a counterfactual policy experiment in which financial bonuses are provided conditional on return to certain unemployed immigrants. Such a policy turns out to be ineffective in a number of dimensions.

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Bibliographic Info

Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 53 (2012)
Issue (Month): 2 (05)
Pages: 453-486

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Handle: RePEc:wly:iecrev:v:53:y:2012:i:2:p:453-486

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Cited by:
  1. Bijwaard, Govert, 2009. "Labour Market Status and Migration Dynamics," IZA Discussion Papers 4530, Institute for the Study of Labor (IZA).
  2. Murat Kırdar, 2013. "Source country characteristics and immigrants’ optimal migration duration decision," IZA Journal of Migration, Springer, vol. 2(1), pages 1-21, December.
  3. Holzmann, Robert & Koettl, Johannes, 2011. "Portability of pension, health, and other social benefits : facts, concepts, issues," Social Protection Discussion Papers 62725, The World Bank.
  4. Robert Holzmann & Johannes Koettl, 2012. "Portability of Pension, Health, and other Social Benefits: Facts, Concepts, and Issues," CESifo Working Paper Series 4002, CESifo Group Munich.

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