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

  • Razin, Assaf
  • Sadka, Efraim

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. Copyright 2000 by The editors of the Scandinavian Journal of Economics.

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Article provided by Wiley Blackwell in its journal Scandinavian Journal of Economics.

Volume (Year): 102 (2000)
Issue (Month): 3 (June)
Pages: 463-79

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Handle: RePEc:bla:scandj:v:102:y:2000:i:3:p:463-79
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  1. George J. Borjas & Stephen J. Trejo, 1991. "Immigrant participation in the welfare system," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 44(2), pages 195-211, January.
  2. Wildasin, D.E., 1992. "Income Restribution and Migration," Papers 92-003, Indiana - Center for Econometric Model Research.
  3. Razin, A. & Sadka, E., 1992. "Resisting Migration: Wage Rigidity and Income Redistribution," Papers 28-94, Tel Aviv.
  4. Richard Hemming, 1998. "Should Public Pensions Be Funded?," IMF Working Papers 98/35, International Monetary Fund.
  5. Peter S. Heller, 1998. "Rethinking Public Pension Reform Initiatives," IMF Working Papers 98/61, International Monetary Fund.
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