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Unskilled Migration: A Burden or a Boon for the Welfare State?

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  • Assaf Razin
  • Efraim Sadka

Abstract

As relatively low earners, migrants are net beneficiaries of the welfare state. Therefore, in a static setup, migration may be resisted by the entire native‐born population. However, it is shown that in a dynamic setup with a pension system, which is an important pillar of any welfare state, migration is beneficial to all income (high and low) and all age (old and young) groups, when the economy has good access to international capital markets. The pro‐migration feature of the dynamic model is weakened and possibly overturned when the economy does not have good access to such markets. In this case, to the extent that factor prices are significantly affected by migration because of low substitution between labour and capital, low‐skill native born and possibly also high‐skill native born may lose.

Suggested Citation

  • Assaf Razin & Efraim Sadka, 2000. "Unskilled Migration: A Burden or a Boon for the Welfare State?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 102(3), pages 463-479, September.
  • Handle: RePEc:bla:scandj:v:102:y:2000:i:3:p:463-479
    DOI: 10.1111/1467-9442.00210
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    References listed on IDEAS

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    1. Razin, Assaf & Sadka, Efraim, 1995. "Resisting Migration: Wage Rigidity and Income Distribution," American Economic Review, American Economic Association, vol. 85(2), pages 312-316, May.
    2. Mr. Peter S. Heller, 1998. "Rethinking Public Pension Reform Initiatives," IMF Working Papers 1998/061, International Monetary Fund.
    3. Mr. Richard Hemming, 1998. "Should Public Pensions be Funded?," IMF Working Papers 1998/035, International Monetary Fund.
    4. David E. Wildasin, 1994. "Income Redistribution and Migration," Canadian Journal of Economics, Canadian Economics Association, vol. 27(3), pages 637-656, August.
    5. George J. Borjas & Stephen J. Trejo, 1991. "Immigrant Participation in the Welfare System," ILR Review, Cornell University, ILR School, vol. 44(2), pages 195-211, January.
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    More about this item

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • H1 - Public Economics - - Structure and Scope of Government

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