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Impacts of Immigration on Aging Welfare-State An Applied General Equilibrium Model for France

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  • Xavier Chojnicki
  • Lionel Ragot

Abstract

Immigration is often perceived as an instrument of adaptation for aging countries. In this paper, we evaluate, using a dynamic general equilibrium model, the contribution of migration policy in reducing the tax burden associated with the aging population in France. Four variants, compared to a baseline scenario based on official projections for France (INSEE, COR, etc.), are simulated with the aim to quantify the immigration effects on the French social protection finances. The first variant assesses the economic effects of immigration in France as projected into official forecasts. The three other variants are built on the same more ambitious annual quantitative flows of immigrants (corresponding to net inflows that have characterized the second great wave of immigration in France in the twentieth century). These three variants only distinguish in terms of the skill structure of new migrants. We show that the age and skill structure of immigrants is the key feature that mainly determines the effects on social protection finances. Overall, these effects are all the more positive in the short-medium term that the migration policy is selective (in favor of more skilled workers). In the long term, beneficial effects of a selective policy may disappear. But the financial gains from more consequent migration flows are relatively moderated in comparison of demographic changes it implies.

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Bibliographic Info

Paper provided by CEPII research center in its series Working Papers with number 2011-13.

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Date of creation: May 2011
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Handle: RePEc:cii:cepidt:2011-13

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Keywords: Migration; CGEM; Overlapping generation; Aging; Public finance; Social protection;

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  1. Kjetil Storesletten, . "Sustaining Fiscal Policy Through Immigration," Homapage Papers, Stockholm University, Institute for International Economic Studies _005, Stockholm University, Institute for International Economic Studies.
  2. Xavier Chojnicki, 2004. "The economie impact of immigration for the host countries," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, ULB -- Universite Libre de Bruxelles, vol. 47(1), pages 9-28.
  3. Hans Fehr & Sabine Jokisch & Laurence Kotlikoff, 2004. "The Role of Immigration in Dealing with the Developed World's Demographic Transition," NBER Working Papers 10512, National Bureau of Economic Research, Inc.
  4. Sims, Christopher A, 1990. "Solving the Stochastic Growth Model by Backsolving with a Particular Nonlinear Form for the Decision Rule," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 8(1), pages 45-47, January.
  5. James J. Heckman & Lance Lochner & Christopher Taber, 1998. "Explaining Rising Wage Inequality: Explorations with a Dynamic General Equilibrium Model of Labor Earnings with Heterogeneous Agents," NBER Working Papers 6384, National Bureau of Economic Research, Inc.
  6. Holger Bonin & Bernd Raffelhüschen & Jan Walliser, 2000. "Can Immigration Alleviate the Demographic Burden?," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, Mohr Siebeck, Tübingen, vol. 57(1), pages 1-, September.
  7. Xavier Chojnicki, 2013. "The Fiscal Impact of Immigration in France: A Generational Accounting Approach," The World Economy, Wiley Blackwell, Wiley Blackwell, vol. 36(8), pages 1065-1090, 08.
  8. M. Dolores Collado & IÒigo Iturbe-Ormaetxe & Guadalupe Valera, 2004. "Quantifying the Impact of Immigration on the Spanish Welfare State," International Tax and Public Finance, Springer, Springer, vol. 11(3), pages 335-353, 05.
  9. George J. Borjas, 2003. "The Labor Demand Curve is Downward Sloping: Reexamining the Impact of Immigration on the Labor Market," NBER Working Papers 9755, National Bureau of Economic Research, Inc.
  10. David Card & Thomas Lemieux, 2000. "Can Falling Supply Explain the Rising Return to College for Younger Men? A Cohort-Based Analysis," NBER Working Papers 7655, National Bureau of Economic Research, Inc.
  11. Yoram Ben-Porath, 1967. "The Production of Human Capital and the Life Cycle of Earnings," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 75, pages 352.
  12. David de la Croix & Frédéric Docquier, 2007. "School Attendance and Skill Premiums in France and the US: A General Equilibrium Approach," Fiscal Studies, Institute for Fiscal Studies, Institute for Fiscal Studies, vol. 28(4), pages 383-416, December.
  13. Xavier Chojnicki, 2011. "Impact budgétaire de l'immigration en France," Revue économique, Presses de Sciences-Po, Presses de Sciences-Po, vol. 62(3), pages 531-543.
  14. Chojnicki, Xavier & Docquier, Frédéric & Ragot, Lionel, 2005. "Should the U.S. Have Locked the Heaven's Door? Reassessing the Benefits of the Postwar Immigration," IZA Discussion Papers 1676, Institute for the Study of Labor (IZA).
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Cited by:
  1. Amandine Ghintran & Enrique Gonzalez-Aranguena & Conrado Manuel, 2011. "A probabilistic position value," Working Papers, HAL hal-00988137, HAL.
  2. Paweł Kaczmarczyk, 2013. "Are immigrants a burden for the state budget? Review paper," RSCAS Working Papers, European University Institute 2013/79, European University Institute.

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