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The impact of immigration under the defined-benefit pension system

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  • Masatoshi Jinno

    (Toyo University, Tokyo)

Abstract

Background: Recently, theoretical studies have started a discussion on how the influx of immigrants affects the finances of the host country. Objective: This paper investigates whether admission of unskilled immigrants, whose children incur assimilation costs in order to become skilled workers, positively influences the net benefits for native residents and immigrants under a defined-benefit pension system (DB system). This paper also compared the results under a DB system with those under a defined-contribution pension system (DC system). Methods: This paper theoretically calculates the net benefits for native residents and immigrants under a DB system and compares the values between under a DB system and under a DC system. Results: The study has three main findings. (1) Under a DB system, native residents do not always become net beneficiaries, even if the government admits an unlimited number of immigrants. This is unlike the analysis under the DC system. (2) The net benefits for native residents caused by permitting a small (large) number of immigrants under the DB system becomes higher (lower) than that under the DC system in certain practical situations. (3) Even if all residents who have the right to vote prefer to admit immigrants, there is a possibility that the net benefits for the native residents may be negative. Conclusions: When admitting immigrants, the government must pay attention to the assimilation costs which offspring of immigrants have to pay and the future generation’s right to vote because they are the main victims of the loss of benefits caused by the assimilation costs under DB system.

Suggested Citation

  • Masatoshi Jinno, 2013. "The impact of immigration under the defined-benefit pension system," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 28(21), pages 613-636.
  • Handle: RePEc:dem:demres:v:28:y:2013:i:21
    DOI: 10.4054/DemRes.2013.28.21
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    References listed on IDEAS

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    1. Aslan Zorlu & Joop Hartog, 2005. "The effect of immigration on wages in three european countries," Journal of Population Economics, Springer;European Society for Population Economics, vol. 18(1), pages 113-151, December.
    2. Scholten, Ulrich & Thum, Marcel, 1996. "Public Pensions and Immigration Policy in a Democracy," Public Choice, Springer, vol. 87(3-4), pages 347-361, June.
    3. Ortega, Francesc, 2005. "Immigration quotas and skill upgrading," Journal of Public Economics, Elsevier, vol. 89(9-10), pages 1841-1863, September.
    4. Krieger, Tim, 2003. "Voting on Low-Skill Immigration under Different Pension Regimes," Public Choice, Springer, vol. 117(1-2), pages 51-78, October.
    5. Tim Krieger, 2004. "Fertility rates and skill distribution in Razin and Sadka’s migration-pension model: A note," Journal of Population Economics, Springer;European Society for Population Economics, vol. 17(1), pages 177-182, February.
    6. Rachel M. Friedberg & Jennifer Hunt, 1995. "The Impact of Immigrants on Host Country Wages, Employment and Growth," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 23-44, Spring.
    7. Poul Schou, 2006. "Immigration, integration and fiscal sustainability," Journal of Population Economics, Springer;European Society for Population Economics, vol. 19(4), pages 671-689, October.
    8. Christian Dustmann & Albrecht Glitz & Tommaso Frattini, 2008. "The labour market impact of immigration," Oxford Review of Economic Policy, Oxford University Press, vol. 24(3), pages 478-495, Autumn.
    9. Andreas Wagener, 2003. "Pensions as a portfolio problem: fixed contribution rates vs. fixed replacement rates reconsidered," Journal of Population Economics, Springer;European Society for Population Economics, vol. 16(1), pages 111-134, February.
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    More about this item

    Keywords

    social security; immigration; pension systems; net benefits;

    JEL classification:

    • J1 - Labor and Demographic Economics - - Demographic Economics
    • Z0 - Other Special Topics - - General

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