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Welfare Migration: Is the Net Fiscal Burden a Good Measure of Its Economic Impact on the Welfare of the Native Born Population?

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  • Assaf Razin
  • Efraim Sadka

Abstract

Migration of young workers (as distinct from retirees), even when driven in by the generosity of the welfare state, slows down the trend of increasing dependency ratio. But, even though low-skill migration improves the dependency ratio, it nevertheless burdens the welfare state. Recent studies by Smith and Edmonston (1977), and Sinn et al (2003) comprehensively estimate the fiscal burden that low-skill migration imposes on the fiscal system. However an important message of this paper is that in an infinite-horizon set-up, one cannot fully grasp the implications of migration for the welfare state, just by looking at the net fiscal burden that migrants impose on the fiscal system. In an infinite-horizon, overlapping generations economy, this net burden, could change to net gain to the native born population.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10682.

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Date of creation: Aug 2004
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Handle: RePEc:nbr:nberwo:10682

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  1. Kjetil Storesletten, 2000. "Sustaining Fiscal Policy through Immigration," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 108(2), pages 300-323, April.
  2. Razin, Assaf & Sadka, Efraim, 1995. "Resisting Migration: Wage Rigidity and Income Distribution," American Economic Review, American Economic Association, American Economic Association, vol. 85(2), pages 312-16, May.
  3. Razin, Assaf & Sadka, Efraim, 2000. " Unskilled Migration: A Burden or a Boon for the Welfare State?," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 102(3), pages 463-79, June.
  4. Razin, Assaf & Sadka, Efraim, 1993. "The Economy of Modern Israel," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226705897, 01-2013.
  5. Hans-Werner Sinn, 2004. "EU Enlargement, Migration and the New Constitution," CESifo Working Paper Series 1367, CESifo Group Munich.
  6. Philip Oreopoulos & Alan J. Auerbach, 1999. "Analyzing the Fiscal Impact of U.S. Immigration," American Economic Review, American Economic Association, American Economic Association, vol. 89(2), pages 176-180, May.
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