Advanced Search
MyIDEAS: Login to save this paper or follow this series

Estimating the Impact of Immigrants on the Host Country Social Security System When Return Migration is an Endogenous Choice

Contents:

Author Info

  • Kirdar, Murat G.

    ()
    (Middle East Technical University)

Abstract

In this paper, I estimate the fiscal impact of immigrants on the German pension insurance (PI) and unemployment insurance (UI) systems 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 data set on immigrants from five different source countries. I find that allowing for the endogeneity of the return decision makes a substantial difference in the net gain of the PI and UI systems from immigrants. Exogenous return migration – which has been the practice of the literature so far – underestimates the net gain for almost all demographic groups and the amount of underestimation is remarkable for several demographic groups. In addition, age-at-arrival profiles of net contributions of immigrants – which form the basis of suggestions on selective immigration policies in the literature – are rotated significantly. Finally, a counterfactual policy experiment in which cash bonuses are provided conditional on return to unemployed immigrants turns out be ineffective in terms of reducing the burden on the state coffers for most demographic groups.

Download Info

If 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.
File URL: http://ftp.iza.org/dp4894.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4894.

as in new window
Length: 62 pages
Date of creation: Apr 2010
Date of revision:
Publication status: published in: International Economic Review, 2012, 53 (2), 453-486
Handle: RePEc:iza:izadps:dp4894

Contact details of provider:
Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org

Order Information:
Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
Email:

Related research

Keywords: social security; saving; life cycle models; immigrant workers; unemployment insurance; public pensions; public policy;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Börsch-Supan, Axel & Schnabel, Reinhold, 1997. "Social security and retirement in germany," Sonderforschungsbereich 504 Publications 97-20, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim.
  2. 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, vol. 11(3), pages 335-353, 05.
  3. Rachel M. Friedberg & J. Hunt, 1995. "The Impact of Immigrants on Host Country Wages, Employment and Growth," Working Papers 95-5, Brown University, Department of Economics.
  4. Heckman, James & Singer, Burton, 1984. "A Method for Minimizing the Impact of Distributional Assumptions in Econometric Models for Duration Data," Econometrica, Econometric Society, vol. 52(2), pages 271-320, March.
  5. Büchel, Felix & Frick, Joachim R., 2000. "The Income Portfolio of Immigrants in Germany - Effects of Ethnic Origin and Assimilation Or: Who Gains from Income Re-Distribution?," IZA Discussion Papers 125, Institute for the Study of Labor (IZA).
  6. Alan J. Auerbach & Jagadeesh Gokhale & Laurence J. Kotlikoff, 1991. "Generational Accounts: A Meaningful Alternative to Deficit Accounting," NBER Chapters, in: Tax Policy and the Economy, Volume 5, pages 55-110 National Bureau of Economic Research, Inc.
  7. Holger Bonin & Bernd Raffelhüschen & Jan Walliser, . "Can Immigration Alleviate the Demographic Burden?," EPRU Working Paper Series 99-17, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  8. Zvi Eckstein & Kenneth I. Wolpin, 1989. "The Specification and Estimation of Dynamic Stochastic Discrete Choice Models: A Survey," Journal of Human Resources, University of Wisconsin Press, vol. 24(4), pages 562-598.
  9. Djajic, Slobodan & Milbourne, Ross, 1988. "A general equilibrium model of guest-worker migration : The source-country perspective," Journal of International Economics, Elsevier, vol. 25(3-4), pages 335-351, November.
  10. Timothy Miller & Ronald Lee, 2000. "Immigration, Social Security, and Broader Fiscal Impacts," American Economic Review, American Economic Association, vol. 90(2), pages 350-354, May.
  11. Axel Börsch-Supan & Reinhold Schnabel & Simone Kohnz & Giovanni Mastrobuoni, 2004. "Micro-Modeling of Retirement Decisions in Germany," NBER Chapters, in: Social Security Programs and Retirement around the World: Micro-Estimation, pages 285-344 National Bureau of Economic Research, Inc.
  12. Kirdar, Murat, 2008. "Labor Market Outcomes, Savings Accumulation, and Return Migration," MPRA Paper 7128, University Library of Munich, Germany.
  13. Rooth, Dan-Olof & Saarela, Jan, 2007. "Selection in migration and return migration: Evidence from micro data," Economics Letters, Elsevier, vol. 94(1), pages 90-95, January.
  14. Keane, Michael P & Wolpin, Kenneth I, 2001. "The Effect of Parental Transfers and Borrowing Constraints on Educational Attainment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(4), pages 1051-1103, November.
  15. Hill, John K., 1987. "Immigrant decisions concerning duration of stay and migratory frequency," Journal of Development Economics, Elsevier, vol. 25(1), pages 221-234, February.
  16. Kit-Chun Lam, 1994. "Outmigration of Foreign-Born Members in Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 27(2), pages 352-70, May.
  17. Dustmann, Christian, 1997. "Return migration, uncertainty and precautionary savings," Journal of Development Economics, Elsevier, vol. 52(2), pages 295-316, April.
  18. Michael P. Keane & Robert M. Sauer, 2010. "A Computationally Practical Simulation Estimation Algorithm for Dynamic Panel Data Models with Unobserved Endogenous State Variables," Working Papers 1008, Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz, revised 05 Jul 2010.
  19. Courtney Coile & Jonathan Gruber, 2000. "Social Security and Retirement," NBER Working Papers 7830, National Bureau of Economic Research, Inc.
  20. Borjas, George J & Bratsberg, Bernt, 1996. "Who Leaves? The Outmigration of the Foreign-Born," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 165-76, February.
  21. Djajic, Slobodan, 1989. "Migrants in a guest-worker system : A utility maximizing approach," Journal of Development Economics, Elsevier, vol. 31(2), pages 327-339, October.
  22. Abdurrahman Aydemir & Chris Robinson, 2008. "Global labour markets, return, and onward migration," Canadian Journal of Economics, Canadian Economics Association, vol. 41(4), pages 1285-1311, November.
  23. Jörn-Steffen Pischke & Johannes Velling, 1997. "Employment Effects Of Immigration To Germany: An Analysis Based On Local Labor Markets," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 594-604, November.
  24. Dustmann, Christian & Kirchkamp, Oliver, 2001. "The Optimal Migration Duration and Activity Choice after Re-migration," IZA Discussion Papers 266, Institute for the Study of Labor (IZA).
  25. George J. Borjas, 1994. "The Economics of Immigration," Journal of Economic Literature, American Economic Association, vol. 32(4), pages 1667-1717, December.
  26. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-42, March.
  27. Guillermina Jasso & Mark Rosenzweig, 1982. "Estimating the emigration rates of legal immigrants using administrative and survey data: The 1971 cohort of immigrants to the United States," Demography, Springer, vol. 19(3), pages 279-290, August.
  28. Keane, Michael P & Wolpin, Kenneth I, 1997. "The Career Decisions of Young Men," Journal of Political Economy, University of Chicago Press, vol. 105(3), pages 473-522, June.
  29. Goeree, Jacob K. & Holt, Charles A. & Palfrey, Thomas R., 2003. "Risk averse behavior in generalized matching pennies games," Games and Economic Behavior, Elsevier, vol. 45(1), pages 97-113, October.
  30. Kjetil Storesletten, . "Sustaining Fiscal Policy Through Immigration," Homapage Papers _005, Stockholm University, Institute for International Economic Studies.
  31. Karin Mayr, 2004. "The fiscal impact of immigrants in Austria--a generational accounting analysis," Economics working papers 2004-09, Department of Economics, Johannes Kepler University Linz, Austria.
  32. Axel Boersch-Supan & Christina B. Wilke, 2004. "The German Public Pension System: How it Was, How it Will Be," NBER Working Papers 10525, National Bureau of Economic Research, Inc.
  33. Poul Schou, 2006. "Immigration, integration and fiscal sustainability," Journal of Population Economics, Springer, vol. 19(4), pages 671-689, October.
  34. Kumcu, M. Ercan, 1989. "The savings behavior of migrant workers : Turkish workers in W. Germany," Journal of Development Economics, Elsevier, vol. 30(2), pages 273-286, April.
  35. Patricia Reagan & Randall Olsen, 2000. "You can go home again: Evidence from longitudinal data," Demography, Springer, vol. 37(3), pages 339-350, August.
  36. LaLonde, Robert J & Topel, Robert H, 1991. "Immigrants in the American Labor Market: Quality, Assimilation, and Distributional Effects," American Economic Review, American Economic Association, vol. 81(2), pages 297-302, May.
  37. Richard B. Freeman & Remco Oostendorp, 2000. "Wages Around the World: Pay Across Occupations and Countries," NBER Working Papers 8058, National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Bijwaard, G.E., 2009. "Labour Market Status and Migration Dynamics," Econometric Institute Research Papers EI 2009-25, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
  2. Holzmann, Robert & Koettl, Johannes, 2011. "Portability of pension, health, and other social benefits : facts, concepts, issues," Social Protection Discussion Papers 62725, The World Bank.
  3. Murat Kırdar, 2013. "Source country characteristics and immigrants’ optimal migration duration decision," IZA Journal of Migration, Springer, vol. 2(1), pages 1-21, December.
  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.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp4894. See general 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: (Mark Fallak).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.