Migration between countries with earnings-related and flat-rate pay-as-you-go social security systems may change human capital investments in both countries. The possibility of emigration boosts investments in human capital in the country with flat-rate benefits. Correspondingly, those expecting to migrate from the country with earnings-related benefits to a country with flat-rate benefits may reduce their investment in education. With suitably planned transfers between the two countries, allowing for migration may generate a Pareto-improvement for all current and future generations. Without transfers, either country may be unable to pay for promised benefits when labor becomes mobile.
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number
CESifo Working Paper No. 1544.
Find related papers by JEL classification: F22 - International Economics - - International Factor Movements and International Business - - - International Migration H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions I20 - Health, Education, and Welfare - - Education - - - General
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