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Voting on Public Pensions With Hand and Feet: How Young Migrants Try to Escape From Gerontocracy

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  • Alexander Haupt
  • Wolfgang Peters
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    Abstract

    Aging changes the political power in a democracy in favor of the elder generations. Consequently, the retirees can extend the pay-as-you-go financed pensions. Under free labor mobility like within the EU, the success of gerontocracy, nevertheless, is restricted by migration of the young generations. This connection between political voting on intergenerational redistribution and voting with the feet is analyzed in a two-country model with overlapping generations. We distinguish between the case in which the young generations‘ migration decision takes its effect on future pensions into account (strategic migration) and the case in which it only reflects differentials in labor income (myopic migration). The paper also pays attention to the implications of common harmonization principles and to the consequences of price discrimination between natives and immigrants.

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    File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2001/wp-cesifo-2001-07/cesifo_wp523.pdf
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    Bibliographic Info

    Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 523.

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    Date of creation: 2001
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    Handle: RePEc:ces:ceswps:_523

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    Related research

    Keywords: Interregional competition on public pensions; migration; labor mobility; gerontocracy;

    References

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    1. Scholten, Ulrich & Thum, Marcel, 1996. " Public Pensions and Immigration Policy in a Democracy," Public Choice, Springer, vol. 87(3-4), pages 347-61, June.
    2. Ravi Kanbur & Michael Keen, 1991. "Jeux Sans Frontieres: Tax Competition and Tax Coordination when Countries Differ in Size," Working Papers 819, Queen's University, Department of Economics.
    3. Hans-Werner Sinn, 2000. "EU Enlargement and the Future of the Welfare State," CESifo Working Paper Series 307, CESifo Group Munich.
    4. Feldstein, Martin S, 1974. "Social Security, Induced Retirement, and Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 905-26, Sept./Oct.
    5. Breyer, Friedrich & Craig, Ben, 1997. "Voting on social security: Evidence from OECD countries," European Journal of Political Economy, Elsevier, vol. 13(4), pages 705-724, December.
    6. Friedrich Breyer & Klaus Stolte, 2001. "Demographic change, endogenous labor supply and the political feasibility of pension reform," Journal of Population Economics, Springer, vol. 14(3), pages 409-424.
    7. Sinn, Hans-Werner, 1990. "Tax harmonization and tax competition in Europe," European Economic Review, Elsevier, vol. 34(2-3), pages 489-504, May.
    8. Goodspeed, Timothy J., 1998. "On the importance of public choice in migration models," Economics Letters, Elsevier, vol. 59(3), pages 373-379, June.
    9. Mansoorian, Arman & Myers, Gordon M., 1993. "Attachment to home and efficient purchases of population in a fiscal externality economy," Journal of Public Economics, Elsevier, vol. 52(1), pages 117-132, August.
    10. Meijdam, Lex & Verbon, Harrie A A, 1996. "Aging and Political Decision Making on Public Pensions," Journal of Population Economics, Springer, vol. 9(2), pages 141-58, May.
    11. De Palma, Andre & Papageorgiou, Yorgos Y., 1988. "Heterogeneity in states and urban structure," Regional Science and Urban Economics, Elsevier, vol. 18(1), pages 37-56, February.
    12. Rachel M. Friedberg & Jennifer Hunt, 1995. "The Impact of Immigrants on Host Country Wages, Employment and Growth," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 23-44, Spring.
    13. Wildasin, David E, 1991. "Income Redistribution in a Common Labor Market," American Economic Review, American Economic Association, vol. 81(4), pages 757-74, September.
    14. Haupt, Alexander & Peters, Wolfgang, 1998. " Public Pensions and Voting on Immigration," Public Choice, Springer, vol. 95(3-4), pages 403-13, June.
    15. von Hagen, Jürgen & Walz, Uwe, 1994. "Social Security and Migration in an Ageing Europe," CEPR Discussion Papers 1022, C.E.P.R. Discussion Papers.
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    Cited by:
    1. Tamura, Yuji, 2004. "Referendum-Led Immigration Policy In The Welfare State," The Warwick Economics Research Paper Series (TWERPS) 713, University of Warwick, Department of Economics.

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